The ICE Semiconductor Index has been up more than 25% over the past 90 days. And Nvidia (NVDA) is printing new highs on a regular basis. So some market participants may be thinking near-term upside for chip stocks is limited.
However, the opposite case can be made. And that could call attention to aggressive ETFs like the Direxion Daily Semiconductor Bull 3X Shares (SOXL) and the Direxion Daily NVDA Bull 2X Shares (NVDU). The Direxion Daily AVGO Bull 2X (AVL) could merit consideration, too. That’s because along with Nvidia, Broadcom (AVGO) is the biggest attention grabber among AI chip equities.
Popularity aside, data confirms active fund managers remain devotees of Nvidia and Broadcom. And the best mutual funds have recently gobbled up more than $6 billion combined of those two chip giants. That’s pertinent to traders considering SOXL. That’s because the NYSE Semiconductor Index — the index SOXL attempts to deliver 300% the daily performance of — allocates almost 16% of its weight to Nvidia and Broadcom.
Other Names Could Drive SOXL Upside
Undoubtedly, Nvidia and Broadcom are the “glam” stocks of the semiconductor space. But SOXL isn’t entirely dependent on that duo to drive the near-term upside traders need to capitalize on the ETF’s leverage. Take the case of KLA (KLAC), which is a top 10 holding in SOXL’s index. As Investor’s Business Daily reports, some of the leading mutual funds recently feasted on nearly $14 billion worth of KLA shares.
Lam Research (LCRX), also a top 10 holding in the NYSE Semiconductor Index, has also recently been favored by active managers. Its taken in $12.32 billion from some of the top overseers of mutual funds.
“Including its latest report on July 30, Lam Research has posted average earnings growth of 39.6% over the last three quarters. Sales growth during that time accelerated from 16% to 34%. Revenue came in at over $5.1 billion in the latest fiscal quarter,” reported Matthew Galgani for IBD.
The publication noted that Lam Research’s technical condition, which is pertinent to SOXL traders, recently flashed a buy signal. That indicates more near-term upside could be in store for the already-high-flying chip stock.
As for the near-term catalysts NVDU and SOXL traders need, Nvidia steps into the earnings confessional on August 27. Ahead of that report, Wells Fargo analyst Aaron Rakers reiterated an “outperform” rating on the stock, citing robust data center demand and encouraging second-half chip sales into China. The research firm boosted its price target on the stock to $220 from $185.
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