Factors Behind the 21% Drop of iShares Semiconductor ETF (SOXX) in July

Key Points

The iShares Semiconductor ETF (NASDAQ: SOXX) fell 21.2% in July 2023 due to various market challenges, including bearish commentary from investor Michael Burry and the release of a competitive Chinese AI model, Kimi K3. Prior to the selloff, the ETF had surged an impressive 112.8% in the first half of 2023 as the AI sector boomed.

Key factors in the decline were Burry’s public claims of overvaluation in AI-related stocks and the collapse of hedge fund Situational Awareness, which reported significant forced selling of its positions after a leveraged strategy backfired. The fund’s assets reached $45 billion earlier in the year but faced margin calls that led to a discounted sale of its portfolio, contributing to the downward pressure on semiconductor stocks.