This Semiconductor ETF Just Had Its Worst Day Since March 2020

On Thursday, November 5th, the iShares Semiconductor ETF (SOXX) experienced its most significant intraday decline since March 2020, marking its worst day in more than two and a half years. The ETF, which tracks the performance of semiconductor stocks, plummeted 12.1%, underscoring the potential consequences of the midterm election results on the technology sector.

The blue wave of Democratic victories in the midterm elections raised concerns that data center construction could be hindered, and artificial intelligence (AI) regulations could gain traction. Semiconductor stocks, which are heavily influenced by such factors, took a significant hit. The iShares ETF's decline is not an isolated incident; it follows an 8.2% drop on October 30th, bringing the fund's total intraday losses over a week to two of its worst performances ever.

The ETF's current value is down 30% over the past month, and it trades nearly 38% below its 52-week high, placing it in a bear market. Factors contributing to the ETF's decline include the decline in smartphone chip sales by Qualcomm (QCOM), the fund's eighth-largest holding, which reported a 26% decrease in fiscal fourth-quarter smartphone chip sales.

Additionally, Micron Technology (MU), the fourth-largest component of the iShares ETF, plunged 17% due to fears of memory chip shortages and potential impacts on the broader tech sector.

While the election results have been cited as a scapegoat for the ETF's recent struggles, individual stock performance issues also play a significant role. The iShares ETF's decline is a reminder of the volatility investors may face in turbulent times, with the potential for overreactions before cooler heads prevail. Despite the pessimism, there is still an opportunity for investors to consider the ETF or individual chip names, as market overreactions can present buying opportunities.