Chip outlook could lift leveraged ETF SOXL

Direxion’s leveraged bearish ETF SOXS gained about 58% over the month ending July 27 after weakness in semiconductor stocks pushed major industry names lower. SOXS added intraday strength earlier that week when shares fell.

SOXL, the Direxion Daily Semiconductor Bull 3X Shares, seeks to deliver 300% of the NYSE Semiconductor Index’s daily returns and declined during the recent sector pullback. The Semiconductor Industry Association’s State of the U.S. Semiconductor Industry report lists industry developments that could affect SOXL when market sentiment shifts.

The SIA report says semiconductor companies have announced more than $770 billion in private-sector investments since 2020 across 160 projects in 30 states. The report adds that these projects expanded manufacturing capacity, equipment production, materials work, packaging and research, and supported jobs and supply-chain resilience.

The report also links semiconductors to artificial intelligence infrastructure. It notes a single AI server rack can contain more than 4,500 packaged semiconductors and that chips account for over 95% of an AI rack’s value. Research cited by the SIA and Deloitte projects more than $4 trillion in global investment in AI data-center infrastructure through 2028, with up to $2.8 trillion directed to semiconductors.

Leveraged ETFs reset daily and aim to deliver multiples of an index’s daily return. SOXL targets 300% of the NYSE Semiconductor Index’s daily move; SOXS targets -300%. These funds produce magnified daily results and can produce different outcomes over multi-day periods. Traders commonly use them for short-term tactical positions tied to headlines and sector momentum rather than long-term holds.

Market participants note that near-term sector volatility remains a factor. The SIA report identifies domestic investment and AI data-center demand as forces that may influence semiconductor company valuations and, by extension, ETFs that track the sector.