Chip ETFs SOXX, SOXL and SMH Slump on Supply Chain Worries

what happened

Semiconductor stocks reversed sharply on Thursday after LAM Research CEO Tim Archer raised concerns about supply chain bottlenecks. On the earnings call, he said that heading into 2027, constraints on certain components will keep limiting chipmakers and equipment companies from fully meeting end demand.

Shares of major chipmakers closed more than 4% lower, with some names dropping over 6% and 8%. Intel, Broadcom, Marvell and Qualcomm also finished in the red. The iShares Semiconductor ETF SOXX fell nearly 7% and kept sliding overnight, the Direxion Daily Semiconductor Bull 3X fund SOXL plunged more than 20%, and VanEck's SMH dropped nearly 6%.

According to Stocktwits, the group had reclaimed some early-week gains after a steep selloff the previous week. Joe Gilbert, portfolio manager at Integrity Asset Management, told Bloomberg that investors are rotating from the Magnificent Seven toward tech more broadly.

why it matters

The key market issue is that supply shortfalls could cap revenue for chipmakers and equipment suppliers and weigh on earnings expectations across the sector. Gilbert also pointed to a wider rotation within tech that is shifting capital between groups. Leveraged funds such as SOXL are especially sensitive to moves in the underlying index, so their declines are much larger in percentage terms.

market impact

Chip stocks and semiconductor ETFs: supply worries pressure the sector, leveraged funds hit hardest

tags

instruments