Investors Put $3.8 Billion Into a Triple-Leveraged Chip ETF This Week as Semiconductor Stocks Lose $1 Trillion

Since the semiconductor selloff accelerated this week, the Philadelphia Semiconductor Index has fallen 12% over six trading sessions, erasing roughly $1 trillion in market value. Now the money is moving the other way, and fast.

Billions flow into the dip

The $72 billion VanEck Semiconductor ETF (SMH) took in more than $430 million over the past three sessions, according to data compiled by Bloomberg. That puts it on pace for its best week since the start of September.

The bigger bet is in leverage. The Direxion Daily Semiconductor Bull 3X ETF (SOXL), which seeks to triple the sector's daily moves, has absorbed about $3.8 billion this week. The fund holds roughly $19 billion in assets, and the inflow is on pace to be its largest weekly haul on record.

SOXL lost nearly 21% of its value over the same stretch.

Todd Sohn, chief ETF strategist at Baird Strategas, put it this way: "The pullback in semiconductor stocks has accelerated once again, but that still hasn't really dampened investors' appetite for buying the dip with leverage."

The week is not over. Both inflow figures are tallies to date, not final totals.

What is driving the selloff

The stated worries are AI spending, intensifying global competition, stretched valuations and rising interest rates. Those are the reasons cited for the six-session slide.

In Asia, the damage was sharpest on Tuesday, Oct. 13. South Korea's KOSPI fell more than 5% at one point, and the Korea Exchange triggered a five-minute sidecar that temporarily restricted program selling. Samsung Electronics and SK Hynix each closed down roughly 8%.

The renewed concern there centered on ChangXin Memory Technologies, a Chinese memory maker that has reportedly made progress on higher-density products. The fear is that Korean producers face pricing pressure from a Chinese rival.

The selling has not stopped. Hong Kong's CSOP 2x Long Hynix fund plunged 22% today, and European chip and AI supplier stocks dropped between 3% and 7% in early trading.

Leverage spills into crypto

The rout also hit crypto venues where traders hold perpetual futures on chip stocks. Roughly $803 million to $812 million in leveraged positions were liquidated over 24 hours around the Asian selloff. Long bets made up the large majority of the total: CoinGlass data put their share at about 84.3%, while a separate tally put it at roughly 86%.

Perpetual contracts on SanDisk saw about $19 million liquidated, more than contracts on XRP. Contracts tied to SK Hynix, Micron and SOXL also appeared among the liquidations.

Bitcoin dipped below $81,000 during Asian hours on Tuesday before recovering above $83,000. It has slipped under $81,000 again today.

US spot Bitcoin ETFs have recorded $451 million in outflows so far in October.

TSMC reports a record quarter

Taiwan Semiconductor Manufacturing reported third-quarter results before the London open today, after Wednesday's close.

Net profit hit a record NT$763.06 billion, up 68.7% from a year earlier and above the NT$746.3 billion analyst estimate. Revenue of US$46.72 billion topped the company's own guidance of US$44.6 billion to US$45.8 billion.

Earnings came to US$4.60 per ADR, against an analyst average of US$4.45. High-performance computing made up 68% of revenue. The 3-nanometer process contributed 33% of wafer revenue and the newer 2-nanometer process 8%.

Gross margin was 66.4%, inside the company's 65% to 67% guidance and slightly under the 66.5% analysts expected.

TSMC's U.S.-listed shares closed Wednesday at $430.00, down 3.4%, and about 11.5% below the $485.80 close on Oct. 5. The shares had not yet traded on the results when those figures were compiled. Separately, one tally puts the semiconductor index's loss at more than $1.5 trillion across six sessions, a larger figure than the $1 trillion cited in the ETF flow data.

What the numbers show

The SMH inflow is about 0.6% of the fund's assets, small next to the sector's losses. The SOXL inflow is roughly a fifth of that fund's size in a single week.

Those buyers are taking the opposite side of the concerns about AI spending and competition. TSMC's record profit and above-guidance revenue are the kind of numbers dip buyers point to. The selling pressure in Seoul, Hong Kong and Europe shows many other investors are not convinced.

It is unclear whether the TSMC beat steadies chip stocks when U.S. trading continues today, Oct. 15, or whether the rate and AI-spending worries keep dominating. Those leveraged buyers have a lot riding on the answer.