Leveraged Semiconductor ETF Gets Record Cash Amid Chip Shortage
Monday, March 1, 2021 01:02 PM By Olivia Raimonde and Claire Ballentine
- Direxion, Invesco products attract record weeks of inflows
Cloud service demand, 5G set to benefit sector: Edward Jones
(Bloomberg) --Tightening supply constraints for semiconductors are sending the price for chip stocks soaring and drawing in record amounts of cash to the funds that track them, including a triple-leveraged product.
The Direxion Daily Semiconductors Bull 3x Shares ETF (SOXL) pulled in $519 million last week alone, for its best five-day period since its inception in 2010, according to data compiled by Bloomberg. At the same time, the iShares PHLX Semiconductor ETF (SOXX) had its best month on record, adding $564 million.
The global chip supply has come under pressure recently as the coronavirus pandemic sent consumers rushing to buy technology products suitable for working and attending school remotely such as laptops, monitors and home networking gear. Combined with strong sector earnings in the fourth quarter, that’s propelling inflows and spurring increasingly bullish bets.
“That space has been on an incredible run,” said Ross Mayfield, investment strategy analyst at Baird. “It makes sense when you think about what is happening to the global economy at large. As we move into a world of ‘everything is connected, everything is electronic or digital in some way,’ it’s powered by semiconductors.”
Chipmaker Micron Technology Inc. rose to its highest level in more than 20 years on Monday, adding to its 26% gain in 2021. The company is the largest holding in the Invesco Dynamic Semiconductors ETF (PSI), which just notched a record week of inflows and is up 16% so far this year, compared with 3.8% for the S&P 500.
“Across the board, the prints for semiconductors have been outstanding,” said Logan Purk, senior research analyst at Edward Jones & Co. “Even though expectations were really high coming into this quarter -- because we saw the rebound starting to materialize -- it exceeded expectations.”
Increased demand for cloud services and the 5G rollouts should also benefit the sector.
“You kind of have these tail winds all lining up together that I think are driving some greater euphoria when it comes to semiconductors,” Purk said. “There is some secular growth here beyond the normal cyclical rebound.”