Very good news for SOXL ETF: is this semiconductor fund a buy?

The SOXL ETF, heavily impacted by AI industry concerns, shows signs of a potential rebound driven by several factors: a US court ruling against Trump's tariffs, which could benefit semiconductor companies like AMD, NVIDIA, and Intel; NVIDIA's strong earnings report with a 69% YoY revenue increase to $44 billion and positive forward guidance; and the formation of a double-bottom pattern at $6.60, suggesting a possible surge to $69.42 if the pattern holds.

Analysis

The Direxion Daily Semiconductor Bull 3x Shares (SOXL) ETF, after a substantial decline from $69.42 in July of the previous year to its current $17 level, reportedly due to concerns within the artificial intelligence industry, now exhibits several indicators suggesting a potential bullish reversal. A key development is a U.S. Court of International Trade ruling deeming certain Trump-era tariffs illegal; should this ruling be upheld against expected appeals, the removal of these tariffs could improve sales volumes for semiconductor firms like NVIDIA, AMD, and Intel by normalizing technology prices, addressing a concern previously voiced by these companies. Further bolstering this outlook are NVIDIA's robust financial results: revenue surged 69% year-over-year to $44 billion, surpassing the $43 billion expectation and exceeding its total 2023 revenue of $26 billion, driven by strong Blackwell chip shipments. NVIDIA's net income also increased 26% to $18.7 billion, and the company issued strong forward guidance for Q3 revenue of approximately $45 billion, even accounting for an $8 billion impact from lost China business. CEO Jensen Huang highlighted that AI inference token generation has surged tenfold in one year, underscoring strong AI demand. This positive performance from NVIDIA, SOXL's largest constituent, is a significant tailwind. From a technical standpoint, the SOXL ETF has formed a double-bottom pattern at $6.60 (its lowest in 2022 and a recent low), with a neckline at $69.45 and a MACD crossover, implying a potential rebound towards $69.42, a 945% increase from current levels, if the pattern validates.

Key Decisions for Investors

• Given the confluence of positive catalysts including NVIDIA's strong earnings (revenue up 69% YoY to $44 billion) and a favorable tariff ruling, investors might consider the SOXL ETF for tactical bullish exposure, factoring in the significant potential upside suggested by the $69.42 technical target while remaining acutely aware that its 3x leverage substantially amplifies both potential gains and losses.
• It is crucial to monitor the legal progression of the tariff ruling, as a definitive repeal of these tariffs could serve as a sustained tailwind for the semiconductor sector and, consequently, for SOXL's performance.
• Investors should implement a stringent risk management strategy, paying close attention to the $6.60 technical support level for SOXL; a breach below this critical double-bottom formation would invalidate the current bullish outlook and necessitate a re-evaluation of long positions.