Semiconductor Bull (SOXL) ETF analysis: the sky is the limit

The Direxion Daily Semiconductor Bull 3x Shares (SOXL) ETF will be in the spotlight on Thursday as investors cheer Nvidia’s earnings. The ETF has been in a strong recovery ahead of the report as it jumped to a high of $50, up from last month’s low of $30.25. It is hovering near its highest swing since March 8th.

Strong Nvidia earnings

The main catalyst for the SOXL ETF is the strong Nvidia earnings that showed that the company has robust growth. Nvidia’s revenue surged by over 260% in Q1 to $26 billion, a figure that was higher than its revenue in 2019.

This growth happened as demand for its data center applications continued rose. Its data center division revenue rose to over $22.6 billion as companies continued buying chips to train their generative AI models.

As a result, the company continued returning money to its shareholders. It increased its quarterly dividend by 150% to $0.10 per share. It also announced that it would split its stock to make it more available to retail traders and investors. In a note, Jensen Huang said:

“Spectrum-X opens a brand-new market for us to bring large-scale AI to Ethernet-only data centers. And NVIDIA NIM is our new software offering that delivers enterprise-grade, optimized generative AI to run on CUDA everywhere — from the cloud to on-prem data centers and RTX AI PCs — through our expansive network of ecosystem partners.”

In the aftermath, Nvidia’s stock price surged by over 6% in the extended hours, giving the company a market cap of over $2.5 trillion. Some analysts believe that it is just a matter of time before Nvidia becomes a $3 trillion company.

Nvidia’s earnings triggered a major comeback among other semiconductor stocks. Super Micro Computer (SMCI) stock surged by over 4% as I predicted on Monday. AMD stock jumped by almost 2% while Intel rose marginally by 0.50%. Taiwan Semiconductor (TSM) rose by over 4% while the VanEck Semiconductor ETF (SMH) rose by 2.4%.

SOXL stock has more upside

Nvidia’s stock performance bodes well for the SOXL ETF, which aims to generate three times the returns of the NYSE Semiconductor Index. The biggest constituents of the index are AMD, Analogue Devices, Applied Materials, Nvidia, Qualcomm, Intel, and Marvell Technology.

The ETF has done well over the years as the role of semiconductors has become pronounced. It has jumped by more than 670% from its lowest level in 2020.

Technically, the stock has been in a strong bull run after bottoming at $30.25 in April. It has moved from $30.25 to almost $50. It will likely trade much higher after the Nvidia earnings. Also, the stock has moved above the 61.8% Fibonacci Retracement level and the 50-day and 100-day moving averages.

Therefore, the stock’s outlook is bullish, with the next point to watch being the year-to-date high at $56.88. This target is about 15% above Wednesday’s close and is slightly below the 78.6% Fibonacci Retracement point.

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