The Direxion Daily Semiconductor Bull 3X Shares (SOXL) plunged almost 20% on Thursday, hitting a six-month low as surging oil prices, concerns over artificial intelligence (AI) financing and a broader technology selloff rattled semiconductor investors.
SOXL was among the most actively traded ETFs during midday trading Thursday, with shares falling to levels last seen in April. The selloff extended across the semiconductor sector, with the VanEck Semiconductor ETF (SMH) dropping around 5.8% and the iShares Semiconductor ETF (SOXX) tumbling more than 6.5%. Both funds hit fresh three-month lows.
Why SOXL's Losses Are So Severe
Unlike traditional semiconductor ETFs, SOXL targets 300% of the daily performance of its benchmark index before fees and expenses. That leverage can magnify both gains and losses. The fund's objective applies to a single trading day, not longer holding periods.
Consequently, a broad sector selloff can translate into a substantially larger decline for SOXL, making it particularly vulnerable when semiconductor stocks face simultaneous macroeconomic and AI-related headwinds.
Thursday's plunge puts the spotlight on whether investors will treat the selloff as a buying opportunity or continue reducing exposure to one of the market's most volatile AI-linked trades.
Technical Talk
SOXL shares were down 19.76% at $82.83 at the time of publication on Thursday, according to market data. The significant decline reflects broader market pressures impacting the semiconductor sector, which has faced volatility amid changing economic conditions and investor sentiment.
The current price is notably below both key moving averages, indicating a bearish trend that suggests a lack of upward momentum in the short to medium term. The substantial gap from these averages highlights the challenges the ETF faces in regaining investor confidence and establishing a more stable price trajectory.
Trading volume on Thursday reached 140.3 million shares, suggesting heightened activity as investors reacted to market developments. SOXL was also the most actively traded fund on Thursday.
Oil Shock Fans Wall Street's Worries
President Donald Trump blamed Iran for the surge in oil prices, alleging in a Truth Social post that Tehran was fabricating attacks and deliberately pushing prices higher ahead of the U.S. midterm elections.
Brent crude futures expiring in December rose 2.3% to above $111 per barrel, while December West Texas Intermediate futures gained 1.4%.
The broader market weakened as investors assessed the implications of higher energy prices. The SPDR S&P 500 ETF (SPY) fell more than 1%, while the Invesco QQQ Trust (QQQ), which tracks the Nasdaq-100, lost around 3%.
For semiconductor stocks, persistent energy-price pressures could add to concerns about inflation, interest rates and the cost of financing capital-intensive AI infrastructure.
Jensen Huang's Funding Warning Hits AI Stocks
Fresh concerns about AI investment added to the pressure.
Nvidia Corp. (NVDA) CEO Jensen Huang told CNBC that demand for neocloud computing providers was exceptionally strong, but access to working capital was becoming a bottleneck.
Nvidia shares fell more than 4.3% in midday trading. Meanwhile, semiconductor companies Coherent Corp (COHR), Entegris Inc (ENTG), Lam Research Corp (LRCX) and Lattice Semiconductor Corp (LSCC) recorded double-digit declines.
The pressure also spread to AI infrastructure providers. CoreWeave Inc (CRWV) dropped nearly 9%, hitting a fresh 17-month low and falling below $60 for the second time that week. IREN Ltd. (IREN) slid below $25 to a fresh 13-month low.
The Roundhill Memory ETF (DRAM) also fell almost 6%, hitting a new three-month low.
