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Cancel the chip sector panic alarm, at least for now. After Tuesday’s sharp intraday plunge, major semiconductor stocks and sector ETFs are pointing higher before the open.
The Philadelphia Semiconductor Index (SOX) closed down 3% in the previous session after falling as much as 6.75% intraday. Even so, at 11,717, the index remains roughly 4,575 points, or 64%, above its March 30 low of 7,142.
Buyers are already stepping back in. The iShares Semiconductor ETF (SOXX) rose 2.5% premarket, while the VanEck Semiconductor ETF (SMH) gained 2%.
Qualcomm (QCOM), which fell 11.5% Tuesday in its own one-day correction, rebounded about 4% before the bell.
That could frustrate not only shorts—if there are any left—but also bulls hoping for a healthier shakeout in frothy positioning and investors waiting for more attractive entry points.
What would a real reversal look like?
Nomura strategist Charlie McElligott said the recent rally has become self-reinforcing, fueled by a gamma squeeze, where option dealers chase underlying shares higher to hedge far out-of-the-money call options, as well as flows into leveraged products such as the Direxion Daily Semiconductor Bull 3X Shares (SOXL) and Leverage Shares 3x Long Semiconductors ETP (SMH3).
McElligott warned that if the dynamic reverses, the Nasdaq (QQQ) could quickly hit limit-down conditions, with SMH potentially falling 15%-20% in a single session.
