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The semiconductor rally has continued to act as a trader’s playground. In a recent comment on X, Eric Balchunas, a senior ETF analyst, remarked on a snapshot of his that half of the most-traded ETFs on that day (that was at the start of June) were related to the semiconductor industry.
Balchunas has his fair share of experience, yet he said he’s never seen anything like that. That’s a big deal. And what’s even more remarkable are the volumes in such ETFs. While the snapshot is more than remarkable, things have since settled a bit.
While such semi-related ETFs don’t comprise half of the top ETFs in the volume list, many of them are sticking around. Indeed, there’s been no shortage of momentum and volatility. And until things settle, I’d look for bets for and against the names to keep drawing in considerable interest from across the board.
The 3X semi ETFs have exploded in popularity
As it stands today, the Direxion Daily Semiconductor Bear 3X Shares (NYSEARCA:SOXS) is at the top of the list. After last Friday’s plunge in the semiconductor stocks, sparked by rising bond yields and fears that hot jobs could cause rate increases, it should be no mystery as to why this aggressive ETF is back in the spotlight.
Indeed, for those seeking to maximize their gains in a reversal of the semiconductor trade, the Direxion Daily Semiconductor Bear 3X Shares is the instrument of choice. Of course, it’s a risky play, but now that there are prominent dents in the armor of the semiconductor trade, perhaps there are a slew of investors who want to swing for the fences.
After all, the great Dr. Michael Burry from The Big Short is still betting against the semiconductors with bearish put options against the iShares Semiconductor ETF (NASDAQ:SOXX). While it’s not quite the same trade, the idea is pretty much the same. Some prefer to go down the route of options, while others would be happy with a levered short ETF against an industry.
As it turned out, going against the semiconductors was not a smooth ride. At least that’s what last week’s action showed us. The industry bounced back quite sharply after the turbulent Friday session. And with the Dierexion Daily Semiconductor Bull 3X Shares (NYSEARCA:SOXL) also enjoying significant trading volumes this week, it’s clear that there’s interest on both sides of the trade.
Betting against the semis is what’s in
Indeed, it feels good to be on the same side of a trade as the likes of Michael Burry. But, at the same time, it’s hard to get the timing right. With various other semi-related ETFs also experiencing massive flows, including bearish 2X short ETFs on individual semi names, including SanDisk (NASDAQ:SNDK | SNDK Price Prediction) and Nvidia (NASDAQ:NVDA), it feels like betting against some form of semi is the hottest trade of the summer.
Given the volatility in both directions, investors had better fasten their seatbelts, as a strong stomach will be needed. To be honest with you, I didn’t even know that individual semi names, like SanDisk and Nvidia, had ETFs tied to them. Either way, though, demand has been scorching this month, and for those looking to capitalize on a ridiculously frothy corner of the market that Michael Burry highlighted, there are ETFs to get the job done.
Personally, I’m staying on the sidelines because there’s no telling if the latest choppiness is anything more than just a blip.
The cohort bounced back quite swiftly, as AI demand has remained hot. While I do think the semis are overcrowded, I think it’s going to be tricky to get the timing right. If the group returns to rally mode, semi-related ETFs could cool off again, at least until the next round of choppiness.