US Semiconductor Stocks 'Picking Up' by Seo-hak Gaemi - What About the 30% Drop?

[Asia Economy Reporter Myunghwan Lee] Recently, U.S. semiconductor stocks favored by Seohak Gaemi investors over the past month have plummeted. Securities firms advised that a correction in semiconductor stock prices is inevitable and that investment strategies should be reconsidered.

On the 19th, Asia Economy analyzed data from the Korea Securities Depository and found that among the top 10 U.S. stocks by net purchase from March 16 to April 15, five were semiconductor-related. The leveraged exchange-traded fund (ETF) 'Direxion Daily Semiconductor Bull 3X SHS ETF (SOXL),' which tracks the Philadelphia Semiconductor Index three times, ranked first in net purchases during this period. Domestic investors net purchased $457 million (approximately 560 billion KRW) worth of SOXL. The ETF 'Ishares Semiconductor ETF (SOXX),' which tracks the same index at 1x, also ranked eighth in net purchases. Other semiconductor-related stocks such as Nvidia (3rd), AMD (6th), and IonQ (7th) were also among the top 10 net purchases.

The problem is that the returns of semiconductor-related stocks during this period were dismal. SOXL, which was priced at $36.30 on March 16 (local time), closed at $25.61 on April 14, down 29.45%. AMD, the sixth most net purchased semiconductor company by domestic investors, also fell 19.34% during the same period. Other semiconductor stocks such as Nvidia (-13.22%), IonQ (-18.44%), and SOXX (-10.04%) also declined simultaneously. The average return of the five semiconductor stocks among the top 10 net purchases was -18.10%.

Securities firms analyzed that the weakness in semiconductor stock prices was due to supply chain disruptions caused by the recent lockdown in Shanghai, China. Seungwoo Lee, a researcher at Eugene Investment & Securities, said, "The lockdown in major Chinese cities has lasted longer than expected, increasing anxiety among set manufacturers," adding, "Following production disruptions of IT components in Shanghai and Kunshan, there are concerns about prolonged decline in domestic demand in China and the possibility of lockdowns spreading to other regions."

Concerns about demand contraction due to economic recession and city lockdowns were also raised. Hyungtae Kim, a researcher at Shinhan Financial Investment, said, "The reason semiconductor companies experienced particularly large stock price declines is due to growing doubts about demand," and added, "Since the beginning of the year, economic recession has heightened market participants' tension, and China, which accounts for over 30% of IT demand, has begun full lockdowns centered on first-tier cities." He advised, "As the market faces a sharp price correction driven by fear of demand contraction, it is necessary to reconsider investment strategies reflecting the impact of China's lockdown and the business conditions of detailed sub-sectors."