Intel Corp. (NASDAQ:INTC) delivered another painful reminder, after Tesla Inc.’s (NASDAQ:TSLA) rout, of the risks of leveraged single-stock ETFs.
A dramatic post-earnings reversal erased nearly $90 billion in market value in less than 24 hours. The reversal comes amid elevated volatility across semiconductor stocks, with investors reassessing AI-related valuations and earnings expectations.
For ETF investors, Intel’s swift boom-to-bust move underscores the trade-off between the return potential of leveraged single-stock funds, such as Direxion Daily INTC Bull 2X ETF (NASDAQ:LINT) and GraniteShares 2x Long INTC Daily ETF (NASDAQ:INTW), and the relative stability offered by diversified semiconductor ETFs.
LINT, INTW Plunge More than 20%
After surging as much as 15% in after-hours trading following its quarterly earnings report on Wednesday, Intel shares gave up all those gains and more by Friday, falling 4% on the day. According to The Kobeissi Letter, the chipmaker has now erased roughly $90 billion in market capitalization since Wednesday evening.
The sharp reversal hit investors in leveraged Intel ETFs particularly hard.
LINT and INTW, both of which seek to deliver twice Intel’s daily performance, have fallen around 20% since Wednesday, magnifying the losses as the stock’s earnings-fueled rally unraveled.
Talking about fund flows, LINT saw outflows of around $14 million since July 10, breaking a good momentum of flows at the beginning of the month. INTW, on the other hand, saw outflows of $48.7 million in July, according to ETFDb.
The move highlights the double-edged nature of leveraged single-stock ETFs. While they can generate outsized gains when momentum works in investors’ favor, they can just as quickly amplify losses when sentiment shifts, especially during earnings season, when large price swings are common.
Semiconductor ETFs Also Feel the Pressure
Intel’s selloff also weighed on broader semiconductor ETFs, although diversified portfolios helped cushion the impact.
Funds including the VanEck Semiconductor ETF (NASDAQ:SMH), iShares Semiconductor ETF (NASDAQ:SOXX), Invesco PHLX Semiconductor ETF (NASDAQ:SOXQ) and SPDR S&P Semiconductor ETF (NYSE:XSD) all hold Intel as part of their portfolios, while leveraged semiconductor funds such as the Direxion Daily Semiconductor Bull 3X Shares (NYSE:SOXL) also came under pressure as the broader chip sector weakened.
SMH was trading almost 2% down on Friday, while SOXX fell almost 4%, SOXQ eroded more than 3%, and XSD fell almost 5%. SOXL was another ETF to suffer amplified losses, with a decline of almost 11% Friday afternoon.
Photo: michelmond / Shutterstock
Recent Comments