Key Takeaways:
Semiconductor ETFs surged as much as 19% Tuesday after Bank of America reiterated a $1,550 price target on Micron Technology, reigniting the AI-memory trade.
"Hyperscaler spending continues to rise despite higher component costs, suggesting semis/memory pricing power," Vivek Arya, semiconductor analyst at Bank of America, said.
Micron climbed 8% to $894.81 intraday, lifting the iShares Semiconductor ETF (SOXX) 6% and the leveraged Direxion Daily Semiconductor Bull 3X (SOXL) and Direxion Daily MSCI South Korea Bull 3X (KORU) about 19% each. The S&P 500 rose 1.5% to a fresh record as Palantir and Caterpillar earnings and easing oil prices supported risk appetite.
The bounce follows a late-July tariff selloff that clipped 36% from SOXL and 41% from KORU over the trailing month. With Micron up 191% year to date and 692% over one year, the memory upcycle remains the market's highest-conviction AI trade, though leveraged wrappers carry daily-reset risk.
The three funds offer different ways to play the same BofA call. SOXX is the unleveraged, plain-vanilla option, tracking a diversified basket of US-listed semiconductor names at a 0.33% net expense ratio with no derivative overlay. That structure explains why its trailing-month drawdown of 10% was a fraction of SOXL's 36% slide, and why Tuesday's 6% gain, while large, was dwarfed by the leveraged wrapper.
SOXL targets three times the daily return of its semiconductor index using swap exposure layered on a cash and short-term Treasury base. Micron is one of the largest reference weights inside that basket at 4.33% of net assets, so the BofA note landed on a fund built to torque exactly this call. Because the fund resets daily, compounding and volatility decay cause multi-week returns to diverge from three times the underlying: SOXL is up 178% year to date and 385% over one year against SOXX's 69% and 115%, yet the one-month drawdown was more than triple SOXX's.
KORU is tied to Korean equities, where Samsung and SK Hynix — the two largest DRAM and HBM producers — dominate the benchmark. KORU jumped 19% Tuesday as the BofA memory call radiated across the Korean chip names. It is up 75% year to date and 326% over one year, yet has lost 16% over five years, a graphic illustration of how daily compounding erodes leveraged returns across long, choppy periods.
The through-line is AI-driven demand for DRAM and high-bandwidth memory. BofA projects Micron could earn about $150 per share in fiscal 2028, and even under a bearish scenario where DRAM and NAND prices decline in line with prior downturns, earnings could stay near $100 — well above the prior cycle peak of about $12 in 2018. The stock trades at roughly eight to nine times that bear-case earnings figure, and long-term supply agreements, expected to cover 50% to 70% of industry capacity, could dampen price swings versus earlier cycles.
BofA also argued China's CXMT is not a threat in AI, since it primarily serves commodity DRAM rather than high-bandwidth memory. Samsung, SK Hynix and Micron together still account for nearly 90% of global DRAM supply. Micron remains down about 9% over the past month even after Tuesday's rebound, leaving the memory trade exposed to any shift in hyperscaler capex or an earlier-than-expected supply wave in mid-2027 to 2028.
This article is for informational purposes only and does not constitute investment advice.
