• The SOXS ETF has been in a strong downward trend since its inception in 2011.
• It experienced only one positive annual return in 2022.
• The ETF will remain under pressure after the strong Nvidia earnings.

The Direxion Daily Semiconductor Bear 3x Shares (SOXS) ETF has become one of the most expensive ways to lose money in Wall Street. The fund has an expense ratio of a whopping 1.03% and has constantly been in the red.

Data shows that the ETF’s total return has been minus 99.96% in the past five years. It has also lost 82% in the past 12 months and 52% this year alone. In contrast, the SOXL ETF has jumped by 57% this year and by over 537% in the past five years.

SOXS vs SOXL ETFs
 

SOXS ETF has underperformed the SOXL ETF

SOXL and SOXS are similar ETFs that aim to achieve the opposite of each other. SOXS generates three times the daily investment return of the opposite of the NYSE Semiconductor Index. SOXL, on the other hand, makes three times the return when the index rises.

Therefore, their performance is an indication that the semiconductor industry has been in a strong bullish trend in the past few years. More people are buying computers, smartphones, and tablets while demand from data centers has soared.

The main catalyst for the SOXS this week is the strong Nvidia earnings. In a statement, the company said that its total revenue jumped by over 260% in the last quarter. Its revenue soared to over $24 billion, a figure that was higher than its full-year revenue in 2019.

Most of its revenue growth came from its data center division, which has gained market share because of the generative artificial intelligence (AI) growth. The company also maintained a bullish estimate for the next quarter and full year.
 

Semiconductor industry to grow

Analysts expect its total revenue to rise to over $24.65 billion in the second quarter and to $26.6 billion in Q2. For the year, analysts believe its revenue will reach over $112 billion and $144 billion in 2024 and 2025, respectively.

Most semiconductor stocks welcomed Nvidia’s earnings. The VanEck Semiconductor ETF (SMH) jumped by over 2.4% in the extended hours. Companies like AMD, Qualcomm, ASML, Broadcom, and Qorvo rose by over 2%.

Therefore, as I wrote on the ProShares UltraPro Short QQQ (SQQQ) ETF, investing in the fund is expensive, risky, and provides no investment edge. As shown below, the ETF’s annual returns turned positive in 2022. It has lost money in all years since its inception since semiconductors have been growing in the past few decades.

SOXS annual returns

So, there is a likelihood that the SOXS ETF, which has over $600 million in assets, will continue falling in the long term. Besides, experts believe that the semiconductor industry will keep growing because of popular themes like artificial intelligence (AI), autonomous vehicles, smart cities, and computing.

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