Investors piled a record sum into a leveraged semiconductor ETF last week. Things didn't work out.

By Christine Idzelis

They tried to buy the dip, but the dip kept dipping

Chip stocks have soared this year, but they've been under pressure in October.

Traders making bullish bets on chip stocks are getting walloped this month, as renewed fears have emerged about investment returns on the buildout of artificial intelligence.

The latest hiccup for the AI trade inspired investors to attempt to buy the dip last week. They poured a record sum into a risky leveraged exchange-traded fund designed to amplify daily returns on semiconductor shares.

The Direxion Daily Semiconductor Bull 3X ETF SOXL, which aims to provide a return 300% of the daily swings of a popular underlying index, attracted a record $6.1 billion of inflows last week, according to FactSet data.

Unfortunately for them, semiconductor shares continued their slide this week, as the leveraged ETF fell another 10.8%, according to FactSet. That marked its third straight weekly decline. The ETF is on track to fall by more than 43% in October.

In other words, they tried to buy the dip, but the dip kept dipping.

Daily inflows into the leveraged ETF continued until Thursday - the day its shares took a huge dive as semiconductor stocks saw sharp selloff, FactSet data showed. Investors have been jittery about the AI trade, which has taken volatile daily swings this month so powerful as to make or break the S&P 500's performance on a given day.

"The semis have been so sensitive to the AI-infrastructure buildout," Mike Reynolds, vice president of investment strategy at wealth-management firm Glenmede, said in a phone interview Friday. "The AI trade has come under some skepticism here."

Shares of semiconductor companies have soared this year as their chips are needed for the development of AI, attracting a lot of investor attention. While huge demand for AI chips has powered their earnings growth, investors are watching companies' spending on their AI buildout carefully on concern that the aggressive pace may not be sustainable.

Big moves in semiconductor shares have created a frenzy around leveraged ETFs that use derivatives to juice up daily returns in the stock market. But using such ETFs as trading tools to speculate that stocks will climb can be extremely painful if they tumble instead.

Shares of the Direxion Daily Semiconductor Bull 3X ETF took a nasty fall on Thursday, with a 20.5% drop that marked its worst day since June 23, according to FactSet data. The loss wasn't as brutal for investors in the iShares Semiconductor ETF SOXX, which slumped 6.8%.

The Direxion Daily Semiconductor Bull 3X ETF has seen a lot of red on a weekly basis so far this month, booking on Friday a third straight week of declines, according to FactSet data.

Investors are weighing chip stocks' valuations after their massive 2026 gains. The iShares Semiconductor ETF has skyrocketed almost 59% so far this year, even though semiconductor shares have come under pressure again lately.

"At these valuations and after a rally that's been this aggressive, it's healthy that investors are taking a sober second look" at the prospect for returns from this AI theme, said Reynolds. It's good that "investors are questioning this in real time before you reach those peak euphoria moments where things get completely detached from reality in fundamentals," he said.

The U.S. stock market fell Friday, with the Dow Jones Industrial Average DJIA, S&P 500 SPX and technology-heavy Nasdaq Composite Index COMP all closing lower. The S&P 500's information-technology sector XX:SP500.45 booked a third consecutive week of losses as chip stocks struggled, its longest weekly losing streak since March, according to FactSet data.

The iShares Semiconductor ETF was also down for a third straight week, on track for a monthly loss of 15.9%.

Chelsea Ng contributed

-Christine Idzelis

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10-23-26 1746ET