Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

The equity market continues to seek clarity on the tariff situation, and the initial reaction year-to-date has been negative across most sectors. Semiconductors bore the brunt of the selloff at first, but are now starting to show some resilience this earnings season. With the Trump Administration emphasizing domestic manufacturing and looking to establish a new trade regime, the most compelling opportunities may unfold in the semiconductor sector.

A Government-Driven Chip Boom?

Part of the situation with tariffs include incentivizing the manufacturing of semiconductor chips in the United States. While the U.S. has been at the center of the artificial intelligence boom, there is increasing competition from China now.

There is another emerging technological development unfolding now that could impact the chip sector, and it has to do with quantum computing. Some of the first quantum chips have been produced by tech giants like Alphabet and Amazon, but at some point, we could see an entirely new reason to be bullish semiconductors. Granted, quantum chips are different than traditional chips, but in theory, it could open an entirely new theme in the tech sector.

Direxion’s Daily Semiconductor Bull 3X Shares (Ticker: SOXL) could see a strong bid in this scenario. This fund seeks daily investment results, before fees and expenses, of 300% of the performance in the NYSE Semiconductor Index*.

This earnings season will be key as well. We’ve already seen some encouraging results from chip names like Texas Instruments, Broadcom, and Nvidia recently. These have come in above estimates despite economic slowdown scares.

Below is a daily chart of SOXL as of April 24, 2025.

Source: TradingView.com

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.

Higher Costs, Weaker Demand?

Despite domestic manufacturing incentives, the challenge lies in how consumers and companies could handle tariff-driven cost increases. If manufacturers pass higher costs onto consumers and spending holds steady, inflation could rise, pressuring chipmakers reliant on consumer markets.

However, if consumers cut back due to higher prices, companies may see margin erosion, lower earnings, and potential layoffs. These chip stocks will be heavily reliant on tax cuts for consumers at that point to help balance it all out. It really all comes down to inflationary pressures staying contained.

The next inflation* report is set to be released on May 13. If this report comes in above estimates, it will warn that some of the effects from tariffs are leading to higher prices. This could weigh on chip companies notably.

Traders seeking to protect themselves from weakness in chips may find a trade with Direxion’s Daily Semiconductor Bear 3X Shares (Ticker: SOXS), which seeks daily investment results, before fees and expenses, of 300% of the inverse performance of the NYSE Semiconductor Index.

Below is a daily chart of SOXS as of April 24, 2025.

Source: TradingView.com

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance quoted. For the most recent month-end performance go to Direxion.com/etfs. For standardized performance click here.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

Leveraged and Inverse ETFs pursue daily leveraged investment objectives which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying index over periods longer than one day. They are not suitable for all investors and should be utilized only by sophisticated investors who understand leverage risk and who actively manage their investments.

NYSE Semiconductor Index (ICESEMI) is a rules-based, modified float-adjusted market capitalization-weighted index that tracks the performance of the thirty largest U.S. listed semiconductor companies. One cannot directly invest in an index.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. A Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.

Leverage Risk – Each Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation or inverse correlation with the Index and may increase the volatility of the Fund.

Daily Index Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Daily Inverse Index Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse leveraged investment objective. The Bear Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Semiconductor Industry Risk – Semiconductor companies may face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel and may face risks related to the availability of materials.

Information Technology Sector Risk — The value of stocks of information technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, government regulation, and competition, both domestically and internationally, including competition from competitors with lower production costs.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, Passive Investment and Index Performance Risk and for the Direxion Daily Semiconductor Bear 3X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

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