Why Direxion Daily Semiconductor Bull 3X ETF Jumped Today
Key Points
Morgan Stanley told investors yesterday to expect $1.2 trillion in semiconductor chip buying this year.
Investors didn't react immediately, but they sure are reacting today!
Also today, Bank of America re-endorsed its Micron stock recommendation.
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The Direxion Daily Semiconductor Bull 3X Shares ETF (NYSEMKT: SOXL) has got its momentum back -- at least for now.
This ETF, which aims to take the performance of semiconductor stocks as a whole and multiply that performance -- up or down -- by 3x every trading day, soared 16.1% through 11:05 a.m. ET today. Over the past four trading days, it's up a staggering 46%.
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But why?
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Morgan Stanley says it's safe to own semiconductor stocks again
The really big news in semis happened yesterday, when analysts at Morgan Stanley sounded the all-clear for artificial intelligence stocks, reassuring investors that hyperscaler revenues are growing fast enough to support all the semiconductor chip-buying they plan to do this year.
In total, capital investment this year is expected to reach $1.2 trillion across the industry -- and that could be a conservative estimate. The Direxion Daily Semiconductor Bull 3X Shares ETF didn't react immediately to this news, guaranteeing continued demand for semiconductors, gaining less than 2% yesterday -- but it's up much more today.
What this means for the Direxion Daily Semiconductor Bull 3X Shares ETF
But again, why?
The answer probably lies in the component stocks that make up the Direxion Daily Semiconductor Bull 3X Shares ETF, which concentrates about 60% of its holdings across just 10 stocks. Three of SOXL's top five holdings -- Micron (NASDAQ: MU), Intel (NASDAQ: INTC), and Advanced Micro Devices (NASDAQ: AMD) -- are all up quite a lot today, more than 7% each. And all five of these top five are up at least a little.
There's even some specific good news driving the gains, with Bank of America doubling down on its Micron endorsement and calling the stock an "enhanced buying opportunity."
Looks like SOXL investors heard that loud and clear.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Micron Technology. The Motley Fool has a disclosure policy.
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