In recent weeks, the iShares Semiconductor ETF (SOXX) has suffered from something of a death by a thousand cuts as multiple major chipmakers offered lackluster earnings and underwent stock market declines.
Out of the exchange-traded fund’s (ETF) three biggest holdings – Advanced Micro Devices (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), and Nvidia (NASDAQ: NVDA) – only NVDA is in the green in the last 30 days.
SOXX is itself 4.83% in the red within the time frame, and the ETF’s share price today, at press time on November 5, stands at $219.31.
Picks for you
Furthermore, SOXX has long been held back compared to some of its peers by the low Nvidia allocation. Indeed, the semiconductor superstar accounts for only 8.13% of the fund’s holdings. Simultaneously, NVDA accounts for almost 20% of VanEck’s semiconductor ETF.
Considering the situation, it comes as little surprise that technical analysis has turned against SOXX, with the chart flashing one of the direst of signals: the death cross.
What the death cross could mean for SOXX ETF investors
The death cross is an indicator that appears once a short-term moving average (MA) – usually the 50-day MA – crosses below a long-term MA – most often the 200-day one,
Usually, such a signal indicates that a major price drop is imminent.
Looking at SOXX’s historical performance, the ETF experienced its other latest death cross in March 2022 and swiftly plummeted. The total decline over the seven months amounted to 40%.
Should such a scenario repeat with the November 2024 death cross, iShares Semiconductor will fall from its press time price of $219.31 to $131.59.
This is SOXX’s best-performing major holding
Looking beyond the three biggest SOXX holdings, it becomes evident that the main upward driver of the ETF is the semiconductor blue-chip Nvidia. Unlike the other two biggest holdings of the fund, NVDA shares are 6.94% up in the last 30 days and, with a press time price of $136.59, 183.57% in the green year-to-date (YTD).
Still, the stock’s future performance remains somewhat uncertain. On the one hand, the ‘insane’ demand for the Blackwell chip – particularly when paired with CEO Jensen Huang’s ambitious plans for annual AI chipset revolutions – indicates significant room for growth.
Simultaneously, most prominent Wall Street experts also maintain that the outlook for NVDA remains bullish.
On the other hand, Nvidia is arguably the most at-risk stock in case of an AI bubble bursting, and one prominent economist even forecasted a 98% collapse for the semiconductor giant’s shares.
Additionally, the situation leading into 2025 is especially uncertain. In September, Fundstrat’s Tom Lee was fairly confident in a continued general stock market rally by the end of 2024 – once the election volatility ends – but explained that the subsequent months are harder to gauge.
Is this disastrous semiconductor stock responsible for the death cross?
If Nvidia is a major contributor to SOXX’s upside, the ETF’s sixth-biggest holding is the exact opposite.
The American semiconductor giant Intel (NASDAQ: INTC) has been having a particularly bad year. Its market share has slid, and its reputation as a quality designer and manufacturer of components has collapsed.
While INTC shares are just over 1% in the green in the last 30 days, they remain 52.71% down YTD as they stand at their press time price of $22.61.
In fact, Intel is in such a bad state that Washington is reportedly considering if it should and how it could bail the strategically important firm out.
Featured image:
Swat, Piotr. Stickers with AMD Radeon and Nvidia GeForce RTX graphics on new laptop computer. Digital image. KONSKIE, POLAND – April 27, 2022. Shutterstock, April 30, 2022. Date retrieved: November 5, 2024.
