The iShares Semiconductor ETF (NASDAQ:SOXX) has slumped into a bear market, falling from a record high of $656 in June to $471, its lowest level since July. This retreat has coincided with the ongoing artificial intelligence (AI) bubble fears that have affected most semiconductor companies.
SOXX, which tracks the biggest semiconductor companies, has dropped as most of its constituent firms tumble. Advanced Micro Devices (NASDAQ:AMD), its biggest constituent, has dropped by 23.20% from its peak this year.
Nvidia (NASDAQ:NVDA) has fallen by 16% from its peak, while Micron (NASDAQ:MU), Broadcom (NASDAQ:AVGO), and Intel (NASDAQ:INTC) have all fallen into a technical bear market.
These stocks have dropped as investors remain concerned about the AI industry continuing to rise. Investors are concerned that this could be one of the biggest bubbles in history. Ray Dalio, Michael Burry, and Ken Griffin have all warned that the bubble may burst as interest rates and bond yields rise.
These concerns have risen in the past few weeks. OpenAI, the AI pioneer, is said to have raised just $11 billion, much lower than the $30 billion it was targeting. It also reduced its targeted valuation from $1.4 trillion to $1.25 trillion.
Other AI companies are also struggling. For example, top neocloud companies like CoreWeave, Nebius, Riot Platforms, and IREN have all plunged, with Elon Musk warning that over 200 neocloud companies will go under as funding dries. All these events will have an impact on semiconductor companies in the SOXX ETF.
These fears explain why investors have started selling their SOXX shares. The fund experienced a $1.54 billion in outflows on Friday, bringing its assets under management to $48 billion.
SOXX ETF Has Formed Bearish Technicals
The weekly chart shows that the SOXX ETF has been in a strong rally in the past few months. It jumped to a record high of $656 in June and then pulled back to the current $471.5.
The fund has already moved below the 50-week moving average and the 23.6% Fibonacci Retracement level. Most notably, the Supertrend indicator has turned red for the first time in over a year.
Therefore, the fund will likely continue falling, potentially to the support level of $400, the 50% Fibonacci Retracement level.