The Direxion Daily Semiconductor Bull 3X ETF (SOXL) plunged 16% on July 29, 2026, as a broad semiconductor selloff deepened over mounting concerns about the sustainability of artificial intelligence infrastructure spending. The 3X leveraged semiconductor fund tracked a much steeper decline than the underlying Philadelphia Semiconductor Index (SOX), which fell roughly 6% as investors reassessed whether tech companies’ unprecedented AI capital expenditure can justify current valuations.
The selloff was sweeping. According to CNBC, chip stocks shed more than $1 trillion in market value since Friday’s close, with 20 of the world’s most valuable semiconductor companies losing $1.3 trillion collectively. Nvidia led the rout with a $238 billion loss, while SK Hynix, Samsung Electronics, and Micron each shed over $100 billion. The declines came even as the SOX index has surged 92% over the past 12 months, fueled by investor enthusiasm for AI-related chip demand.
The immediate trigger was disappointing earnings news from South Korea’s memory chip makers. SK Hynix closed 9.61% lower in Seoul after missing analyst estimates despite posting record quarterly profit and revenue. The company’s earnings miss, combined with broader concerns about AI spending, sparked selling across the sector.
But the deeper driver is investor doubt about whether hyperscalers’ massive AI infrastructure spending can be sustained and eventually turn profitable. Alphabet announced on July 28 that it would raise its 2026 capital expenditure forecast to $195 billion to $205 billion, a move intended to accelerate AI infrastructure buildout. Instead, the announcement triggered selling. “Investors are reassessing whether near-term revenues can justify unprecedented AI spending levels,” said Charlie Dai, VP principal analyst at Forrester Research, according to CNBC. “Some also worry about growing competition in chips and AI infrastructure.”
Michael Field, chief equity strategist at Morningstar, told CNBC that the selloff “appears to be driven largely by sentiment rather than fundamentals.” He added: “Simply put, it’s loss of confidence. We continue to see upside in many AI names, but these are growth stocks, and much of their value comes from cash flows expected far out into the future, which requires a lot of faith from investors.”
The semiconductor sector has been one of the main beneficiaries of the AI boom, with the SOX index rising 92% over the past 12 months. However, the index has fallen nearly 20% over the past month as concerns about AI spending growth have mounted. Dai noted that while the selloff signals a “repricing of expectations after an exceptionally strong rally,” it reflects “less about weakening AI demand and more about” investor reassessment of how quickly the AI infrastructure cycle can mature.
SOXL, a 3X leveraged bull ETF, amplified the underlying semiconductor index’s losses. The fund is designed to deliver triple the daily performance of the SOX, which means it magnifies both gains and losses. Since mid-June, SOXL has fallen more than 60% while the unleveraged iShares Semiconductor ETF (SOXX) has declined roughly 25%, underscoring the compounding effect of leverage during extended downturns.
Sources
- CNBC — Chip stocks shed more than $1 trillion; SK Hynix missed earnings; Alphabet raised capex forecast; analyst commentary on AI spending concerns
- Morningstar — Chief equity strategist Michael Field on sentiment-driven selloff and investor confidence in growth stocks
- Forrester Research — VP principal analyst Charlie Dai on AI spending sustainability concerns and competitive pressures
