It Could Be An Epic Day For These Chip ETFs

Starting on Monday, June 22, about 55% of the widely followed PHLX Semiconductor Sector Index (XSOX) reports earnings over the next two weeks, but that index and exchange-traded funds tracking it could be tested as soon as today.

What Happened

On Thursday, Taiwan Semiconductor Manufacturing Co. TSM reports earnings. The stock accounts for just over 4% of the PHLX Semiconductor Sector Index, but its reach extends far beyond that figure.

“Almost 90% of the iShares PHLX Semiconductor ETF SOXX and the VanEck Vectors Semiconductor ETF SMH — the two largest semiconductor ETFs — is in some way connected to the company, known as TSMC,” reports Bloomberg.

So yes, Taiwan Semiconductor's report could easily move the Direxion Daily Semiconductor Bull 3X Shares SOXL or the Direxion Daily Semiconductor Bear 3X Shares SOXS. SOXL tries to deliver triple the daily returns of the PHLX Semiconductor Index while the bearish SOXS attempts to deliver triple the daily inverse returns of that benchmark.

Why It's Important

Various data points confirm the importance of Taiwan Semiconductor in the chip space and its ability to potentially move related ETFs, including SOXL and SOXS.

“Equipment suppliers like ASML Holding NV, Applied Materials Inc., and KLA Corp. all derived more than 10% of their revenue from TSMC in the previous quarter, the data show,” reports Bloomberg. “For example, about 15% of Applied Materials’ fiscal second-quarter revenue came from its relationship with TSMC. Applied Materials has about a 4% weight in both the SOXX and SMH funds.”

Given the importance of Taiwan Semiconductor to broader chip space, it is arguably surprising that SOXL and SOXS have not seen more activity in advance of that company's Thursday report. Data from Direxion indicate SOXL and SOXS have been mostly docile in recent days. That could change next week as more US-based chip companies deliver quarterly results.

What's Next

What Taiwan Semiconductor has to say about its second-half outlook, particularly regarding demand for smartphone chips, will be the driving factor in the stock's near-term performance and likely have a residual impact on the likes of SOXL and SOXS.

Related Links

New ETFs Marry Low Vol And Quality

EBIZ ETF For E-Commerce

Posted In: direxion ETFsEarningsLong IdeasNewsSector ETFsShort IdeasPre-Market OutlookTrading IdeasETFs

Ad Disclosure: The rate information is obtained by Bankrate from the listed institutions. Bankrate cannot guaranty the accuracy or availability of any rates shown above. Institutions may have different rates on their own websites than those posted on The listings that appear on this page are from companies from which this website receives compensation, which may impact how, where, and in what order products appear. This table does not include all companies or all available products.

All rates are subject to change without notice and may vary depending on location. These quotes are from banks, thrifts, and credit unions, some of whom have paid for a link to their own Web site where you can find additional information. Those with a paid link are our Advertisers. Those without a paid link are listings we obtain to improve the consumer shopping experience and are not Advertisers. To receive the rate from an Advertiser, please identify yourself as a Bankrate customer. Bank and thrift deposits are insured by the Federal Deposit Insurance Corp. Credit union deposits are insured by the National Credit Union Administration.

Consumer Satisfaction: Bankrate attempts to verify the accuracy and availability of its Advertisers' terms through its quality assurance process and requires Advertisers to agree to our Terms and Conditions and to adhere to our Quality Control Program. If you believe that you have received an inaccurate quote or are otherwise not satisfied with the services provided to you by the institution you choose, please click here.

Rate collection and criteria: Click here for more information on rate collection and criteria.