Heavy Buying of Leveraged ETFs Like SOXL Deepens Losses; Experts Warn Against "Over-Reliance" on Semiconductors
Massive Influx of 5.5 Trillion Won to U.S. Equities Since Oct 7

As the domestic stock market experiences turbulence, individual investors—affectionately known as "Seohak Ants"—have flocked in droves to the U.S. market. However, much like their concentration in Samsung Electronics and SK Hynix at home, their heavy focus on semiconductor stocks in the U.S. has yielded disappointing returns. While experts maintain a long-term positive outlook on the semiconductor sector, they warn that a portfolio heavily skewed toward a single industry carries significant risks.

According to the Korea Securities Depository (KSD) on the 21st, net purchases of U.S. stocks by domestic retail investors totaled $4.21738 billion (approx. 5.6 trillion won) from October 1 to 19. This is more than four times the total net purchase amount for the entire month of September ($1.00128 billion).

The buying momentum surged dramatically starting October 7. During the first six days of October, purchases stood at $2.88377 billion against sales of $2.82060 billion, resulting in a modest net purchase of just $63.17 million (approx. 84 billion won). However, between October 7 and 19, purchases soared to $10.28407 billion while sales reached $6.12986 billion, bringing the net purchase figure to a staggering $4.15421 billion (approx. 5.52 trillion won).

This shift appears to be driven by investors fleeing the tumbling domestic market. Between October 1 and 6, the Kospi rose by 1.51%, but from October 7 to 19, it suffered declines in six out of eight trading sessions, plunging 16.9% overall. During the same period of domestic freefall, the S&P 500 and Nasdaq indices in the U.S. fell by a relatively modest 1.64% and 4.24%, respectively.

Yet, this reallocation of capital has not paid off as hoped. Between October 7 and 19, the U.S. stock most heavily net-purchased by domestic investors was SOXL, a leveraged ETF tracking 3x the Philadelphia Semiconductor Index, totaling $4.08792 billion (approx. 5.43 trillion won). This accounted for a staggering 98.4% of all U.S. stock net purchases during the period. Over these dates, SOXL plummeted by 39.9%.

This downturn stems from a 14.4% drop in the underlying Philadelphia Semiconductor Index, pressured by concerns over the rise of Chinese memory maker Changxin Memory Technologies (CXMT) and mounting funding burdens linked to expanded artificial intelligence (AI) investments. Between October 7 and 16, the Philadelphia Semiconductor Index suffered an eight-session consecutive losing streak—its longest continuous decline since 2006.

Other major semiconductor-related stocks were not spared. According to KSD data, as of October 16, a significant number of U.S. semiconductor stocks featured prominently in the top 50 foreign equities held by domestic investors, and all experienced sharp declines: Micron (-13.5%, 12th), Broadcom (-11.0%, 18th), SanDisk (-17.4%, 21st), AMD (-17.1%, 24th), Intel (-18.2%, 28th), and Marvell (-17.4%, 31st).

Despite the steep sell-off driven by fears surrounding CXMT’s market catch-up and the heavy debt burdens of U.S. AI cloud firm CoreWeave, many market analysts advise against overly pessimistic interpretations. They argue that because the fundamental semiconductor industry remains structurally sound, attention should be paid to optimistic projections.

In its recent third-quarter earnings call, TSMC reported that AI demand remains "extremely robust" with no signs of a slowdown. ASML also noted during its earnings release that growing long-term contracts from leading-edge customers mean semiconductor demand will outpace supply at least through 2028. Meanwhile, market research firm TrendForce slightly downgraded its near-term demand outlook for mobile and consumer electronics memory, but maintained robust demand forecasts for data center SSDs and server DRAM.

Nevertheless, experts caution that portfolios overly biased toward semiconductors are bound to take a direct hit during sector-wide pullbacks. Dan Coatsworth, investment analyst at U.K. platform AJ Bell, noted in a report on October 13, "The semiconductor industry is deeply cyclical, and some investors tend to forget that. If a market correction is driven by technology stocks while portfolios remain heavily exposed to semiconductors, the damage can be severe."

[ⓒ Global Economic Times. 무단전재-재배포 금지]