Ian Bezek
Investor/Writer, Latin American Equities, Former Analyst at Kerrisdale
The 3x leveraged semiconductor ETF is exposed to a chip-stock reversal because leveraged ETF decay worsens as volatility rises: the bigger the bubble gets on the way up, the faster capital is destroyed on the way down. Market makers have not marked up future chip volatility enough, making way-out-of-the-money 2028 puts highly likely to triple, though 5x-plus returns would require nailing the timing. Unleveraged semiconductor funds carry no such decay. x.com x.comÂ
SOXL holders hoping the bull run resumes more slowly misunderstand leveraged ETFs, which move fast in both directions. US leveraged semiconductor ETF assets went from $14B to $163B in three years and now sit at $100B, a 39% drawdown. Even after that, assets remain seven times where the trade started, so the bubble has not popped, only exhaled, and those trapped in 3x products face more of the same. x.comÂ
The 3x leveraged semiconductor ETF SOXL will certainly go to zero within five years, because its daily rebalancing keeps adding exposure as prices rise and selling at lows as they fall. Leveraged ETFs go to zero even in the biggest bull markets. That answers @nongxiaodefa, who joked about going all in on SOXL and opening the mystery box in five years. x.com x.comÂ
Semiconductors are exposure worth owning even through a 3x leveraged ETF, so SOXL is worth buying on a dip. High implied volatility comes with leverage rather than signaling the uncertainty it would in lower-quality names. The risk is a sharp drop, such as 40% in a week. x.com x.comÂ
Semiconductor earnings have outpaced prices, making the selloff look more like forced positioning than a broken growth case. Since January 2025, the SOX rose about 114% while reconstructed forward earnings rose about 198%; the estimate is approximate. Hedge funds sold global tech at a greater-than-three-standard-deviation pace in October 5-16, a pattern seen near earlier lows, though another sharp flush could come before a reversal. x.comÂ
War escalation and the midterms will keep investors from increasing gross or net semiconductor exposure. SOXX will take out its July lows before any sustained rally; against a suggested 5% dip and 50% rebound, the path is '5% down then 100% down.' x.com x.comÂ
Semiconductors could gain from desks buying back exposure sold ahead of leveraged-product rebalancing if markets recover even mildly. The expected selling flow was about $16B, and a strong signal also favored leveraged semiconductor exposure through SOXL and Nebius. There is no clear read on whether the market has bottomed over a longer horizon. x.comÂ
Leveraged ETFs such as the 3x semiconductor bull fund should never be owned: it lost a third of its value in a single-day crash while individual chip stocks fell only 5%-10%. x.comÂ
Semiconductors could capture scarce spot compute's value if its forward curve holds. Compute trades in deep contango, while chip stocks price in little of that value; near-term moves are unpredictable. That makes the sector very bullish. The earlier lab-funding risk looks less acute: Anthropic should hold nearly $200B cash after its IPO and is operating-cash-flow profitable. Even with 2029 capex cuts, chips look cheap if future buyers do not default. x.com x.com x.com x.com x.comÂ
Leveraged semiconductor and Nasdaq 100 ETFs should beat a 3x position in the average individual name because market correlations are falling and dispersion is rising. Low correlation among basket members reduces the volatility drag that hurts levered ETFs, as seen when CPU stocks pumped while memory dumped. x.comÂ
Intel's fading options activity at $70 and $80, alongside a strong $100 node, improves its near-term setup. The stock bounced at its 200-day average alongside SMH and SOXX, supporting a $98-100 target this week; $110 calls are further out and $130 calls are for November-December. Dealers seem to have moved their hedges, though $80 may still come after October 30 earnings. The share target remains $140. x.com x.comÂ
