The Direxion Daily Semiconductor Bull 3X Shares (NYSEARCA: SOXL) stock price has risen 44% since the year started as the shares of semiconductor companies rallied. The rally in semiconductor manufacturers has been driven by the AI revolution, which has attracted attention from many companies keen to jump on the trend.
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While many people are excited about ChatGPT and how it could help them with their jobs, businesses or even classwork, investors have realised that the widespread adoption of AI systems would drive demand for computer chips. AI systems require significant computing power to function well, which is why chip manufacturers have seen their stock rally.
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As more companies launch AI systems targeting different industries, they will rely heavily on having the fastest computer chips and systems to run their AI systems. However, not all companies will build their custom AI systems since most will simply license or pay to access the AI systems developed by other firms.
Still, we have seen the shares of semiconductor chip manufacturers such as Nvidia rise 56.8% this year after OPen Ai launched Chat GPT. Other leading tech companies such as Microsoft and Google have also announced their proprietary versions of Generative AI systems in the mad rush to dominate the global AI industry.
However, we are still at the beginning of the AI industry growth journey, and there will be more innovative AIs launched in future. The future AIs will be more advanced than the Generative AIs we are seeing right now and will be customised to the needs of specific industries.
Therefore, investors are correct in buying the shares of semiconductor manufacturers, but this is now a popular investment idea; hence, the potential gains will be limited. Investors might be better off investing in companies within the AI value chain other than chip manufacturers.
SOXL is a 3X bullish ETF that tracks the movements of the ICE Semiconductor index. However, the ETF is not intended to mimic the long-term returns of the underlying index. The ETF's primary purpose is to deliver 3X the daily movements of the ICE index. Therefore, investors should only hold SOXL for short periods.
*This is not investment advice.
The SOXL stock price.
The SOXL stock price has risen 44% this year as semiconductor stocks rally on upbeat sentiment.
eToro is a multi-asset investment platform. The value of your investments may go up or down. Your capital is at risk.
