Investors continue to pour billions into semiconductor ETFs, including speculative leveraged funds such as the Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL), even as Fidelity Investments‘ Director of Global Macro Jurrien Timmer warns the semiconductor cycle could be nearing a peak.
Fidelity Warns of a ‘Cycle Peak’
Analyzing aggregate flows across the U.S. and South Korean semiconductor markets, Timmer pointed out the historic disconnect between falling asset values and persistent speculative buying.
“I’m a little surprised to see the speculative flows into semiconductor ETFs be as sticky as they are,” Timmer stated on social media platform X. “While the AUM of these ETFs is way down, the flows have not really reversed.”
Timmer noted that the semiconductor industry historically operates on a roughly 40-month earnings cycle. Looking at the sector’s current trajectory, he cautioned that the momentum might soon run out.
“While the earnings momentum remains strong, we are ‘due’ for a cycle peak relatively soon,” Timmer warned. “Perhaps we are about to reach peak rate-of-change.”
Billions Flood In Despite Shrinking Value
Despite recent market turbulence erasing billions in total value across major semiconductor exchange-traded funds, fresh cash inflows remain resilient. The divergence highlights a market where traders are aggressively buying the dip.
According to recent one-month fund flow data, SOXL recorded a massive $4.53 billion in net inflows. This occurred even as the leveraged fund’s total Assets Under Management (AUM) dropped by $906.07 million due to extreme price volatility.
The trend extends to the sector’s non-leveraged heavyweights. The VanEck Semiconductor ETF (NASDAQ:SMH) saw $1.04 billion in net inflows despite a $2.03 billion drop in net AUM. Similarly, the iShares Semiconductor ETF (NASDAQ:SOXX) added $1.53 billion in new cash while shedding $4.60 billion in AUM.
| ETF Ticker | 1-Month Net Inflows (New Cash Added) | 1-Month Net AUM Change (Total Value Loss) | Primary Driver of AUM Drop |
| SOXX (iShares) | +$1.53 Billion | -$4.60 Billion | Negative Price Performance |
| SMH (VanEck) | +$1.04 Billion | -$2.03 Billion | Negative Price Performance |
| SOXL (3x Leveraged) | +$4.53 Billion | -$906.07 Million | Extreme Price Volatility |
How Have These ETFs Performed?
| ETF Ticker | 1-Month | 6-Months | YTD | 1-Year |
| SOXX (iShares) | -5.97 | 51.79% | 79.26% | 118.50% |
| SMH (VanEck) | -4.29% | 41.00% | 60.97% | 94.88% |
| SOXL (3x Leveraged) | -26.06% | 125.29% | 238.23% | 407.71% |
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
Photo courtesy: Shutterstock
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