These semiconductor ETFs just had their worst performances in four years

By Emily Bary

The levered Direxion Daily Semiconductor Bull 3X Shares ETF falls about 23%

The technology sector saw heavy pressure in Tuesday's session, which made for the worst day in more than four years for several semiconductor-focused exchange-traded funds.

The iShares Semiconductor ETF SOXX, which tracks the PHLX Semiconductor Index SOX, dropped 7.6% on Tuesday and the VanEck Semiconductor ETF SMH slid 7.5%. For both, that marked the worst daily performance since March 18, 2020.

The Direxion Daily Semiconductor Bull 3X Shares ETF SOXL was off 22.5% to log its worst drop since it shed 25.9% on March 18, 2020. Tuesday's sharp move was understandable as the ETF is levered and intended to achieve 300% of the performance of the NYSE Semiconductor Index.

See also: Nvidia's stock-buyback plan is one of the biggest of 2024. Is that a good thing?

In looking at the PHLX Semiconductor Index, all components were bleeding red ink, with shares of Monolithic Power Systems Inc. (MPWR), the worst performer on the day, off more than 10%.

Meanwhile, Nvidia Corp. shares (NVDA) flirted with their worst drop since March 2020 as well, but avoided that fate. The stock closed down 9.5%, but had been off more than 10% shortly before the close. That would have translated to the stock's worst daily decline since it lost 18.5% on March 16, 2020. Current declines amounted to the worst drop since a 10.0% fall seen this April.

Wedbush's Daniel Ives wrote that "investors may fret about this massive spending wave and [be] frustrated that top-line growth/margins from these investments could take time to materialize," though he doesn't think the current landscape is reminiscent of the 1990s tech bubble. Rather, the thinks we're in an earlier stage of the artificial-intelligence revolution.

See more: Nvidia's stock hurt by 'high class problem,' but these analysts say keep buying

Prior to Tuesday's open, Mizuho desk-based analyst Jordan Klein wrote that "while investors survived a very big week of earnings to end the summer focused on [Nvidia], and survived, it is exactly [Nvidia] that is dragging the tech sector lower."

He expected investors to "over-focus" on Nvidia's moves in September, which historically is the worst month for major indexes - and for Nvidia's stock itself.

See more: Nvidia's stock usually performs worst in September - but there are silver linings

-Emily Bary

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09-03-24 1803ET

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