Is SOXL and KORU a good buy now?

Chip stocks have fallen hard from their June highs. The leveraged products built around them have fallen considerably harder. That has turned what might have been an ordinary correction into a much more violent deleveraging event.

For investors looking at the Direxion Daily Semiconductor Bull 3X ETF, or SOXL, and the Direxion Daily MSCI South Korea Bull 3X ETF, or KORU, the question is obvious:

Is this the dip to buy—or is a better entry still coming during the third quarter?

My answer is that the long-term semiconductor story remains compelling, but this is not the moment for an undisciplined, full-sized bet on leverage.

This is more than ordinary profit-taking

The semiconductor rally had become exceptionally crowded. AI accelerators, memory, networking equipment and chip-manufacturing tools were all benefiting from expectations of years of infrastructure spending.

When investors began questioning valuations, the sustainability of AI capital spending and the speed at which those investments would produce revenue, positioning started to unwind.

According to ETF.com, the unleveraged SOXX semiconductor fund lost approximately 24% during the recent decline, while SOXL fell roughly 61%. That difference demonstrates exactly what a three-times-leveraged product is designed to do: magnify daily movement in both directions. ETF.com

The selling was not confined to the United States. Reuters reported that South Korea’s KOSPI fell more than 20% from its June 22 record close, placing it in bear-market territory. Samsung Electronics and SK Hynix were central to the decline. Reuters via MarketScreener

This was a global semiconductor correction amplified by concentrated positioning and mechanical selling.

Goldman Sachs saw the leverage building

Goldman Sachs provided an important warning before the worst of the decline.

In May, Goldman reported that semiconductor and semiconductor-equipment stocks had become the most net-sold US subsector among its hedge-fund clients over the preceding month. At the same time, gross leverage among Goldman Sachs Prime Services clients had risen to record highs.

That distinction matters. Funds were not necessarily abandoning the long-term AI thesis. They were reducing concentrated positions, taking profits and adding hedges while overall leverage remained unusually elevated. Goldman Sachs

By July, the problem was especially visible in Korea.

A Goldman report cited by ChosunBiz concluded that rapid deleveraging in newly launched single-stock leveraged ETFs had amplified the KOSPI’s intraday volatility. Some two-times-leveraged ETFs tied to Samsung and SK Hynix reportedly fell more than 30% in one session.

Those declines forced fund managers to sell more of the underlying shares to restore their target leverage. Falling prices created additional selling, producing a feedback loop.

Goldman estimated that ETF liquidations accounted for 62% of domestic institutional net selling during the episode. Importantly, the firm characterized the correction as a liquidity and positioning shock rather than clear evidence that semiconductor fundamentals had collapsed. ChosunBiz

That does not guarantee a quick recovery. It does suggest that price action became worse than the underlying earnings picture alone would justify.

SOXL and KORU are not the same trade

SOXL and KORU are sometimes discussed together, but they provide meaningfully different exposure.

SOXL targets three times the daily performance of the NYSE Semiconductor Index. Its underlying index contains US-listed semiconductor and equipment companies including Nvidia, Broadcom, Micron, AMD, Applied Materials and KLA. Direxion

KORU targets three times the daily performance of the MSCI Korea 25/50 Index. It is a leveraged South Korea fund, not a pure semiconductor ETF. Direxion

However, the distinction becomes less comforting when looking at KORU’s underlying index. As of June 30, SK Hynix represented 27.41% of the MSCI Korea 25/50 Index and Samsung Electronics represented another 23.38%. Together, those two companies accounted for more than half of the index. MSCI

KORU therefore combines several risks:

• Three-times daily leverage
• Heavy semiconductor concentration
• Single-country exposure
• Korean currency exposure
• Local regulatory and market-structure risk

It can rally dramatically when Korean chip stocks recover, but calling it a diversified semiconductor investment would be misleading.

Why daily leverage becomes dangerous during volatility

Both funds target three times the return of their benchmarks for one day—not three times the cumulative return over several weeks or months.

Consider a simplified example.

An index that falls 10% and then gains 11.1% returns approximately to its starting point.

A hypothetical three-times product would fall about 30% on the first day and gain roughly 33.3% on the second. But a 33.3% gain on the remaining 70% leaves the investor with approximately 93.3% of the original capital.

The index recovered. The leveraged product remained down about 6.7%, even before expenses and imperfect tracking.

That is volatility decay. The more violently prices alternate, the more difficult it becomes for a daily leveraged fund to translate a correct long-term thesis into a profitable result.

Adding personal margin on top of a three-times fund compounds the same risk again. I would avoid that entirely.

The argument for buying the dip now

The bullish case has substance.

Goldman has said the Korean correction appears more connected to liquidity and forced positioning than deteriorating semiconductor fundamentals. Earnings estimates for Samsung and SK Hynix had not been broadly revised downward when Goldman assessed the decline.

Demand for high-bandwidth memory, advanced packaging, networking and AI compute has not vanished. Semiconductor supply remains constrained in important parts of the market, while the largest technology companies continue committing extraordinary amounts of capital to AI infrastructure.

The market has also removed a great deal of speculative excess. A 20% decline in an unleveraged index and a substantially larger collapse in leveraged products can create attractive prices if the earnings outlook holds.

For investors with a multiyear horizon, beginning a measured position in unleveraged semiconductor exposure after a drawdown is much easier to defend than chasing the sector at its peak.

The argument for waiting through Q3

A large decline does not automatically create a bottom.

The third quarter contains several possible catalysts:

• Earnings and guidance from major semiconductor companies
• Updates to hyperscaler AI capital-spending plans
• Evidence about memory pricing and demand
• Changes in earnings estimates
• Further leveraged-fund liquidations
• Interest-rate and geopolitical developments

The first rebound after forced selling can be powerful, but it can also be temporary. Markets frequently retest lows after the most urgent sellers have finished.

For leveraged products, waiting for confirmation carries an additional advantage. Missing the first part of a rebound can be less damaging than entering before another sharp decline. A second 10% drop in the underlying index can translate into something close to a 30% daily loss for a three-times bull fund.

I would rather buy after the sector demonstrates stability than attempt to identify the precise bottom while forced deleveraging is still influencing prices.

My approach: participate without pretending to know the bottom

I do not view this as a binary choice between buying everything today and remaining completely on the sidelines.

A more disciplined approach would be:

1. Start with a small position rather than a full allocation.
2. Preserve cash for a retest or another leg lower.
3. Add only if earnings estimates remain stable and price action begins forming a base.
4. Keep leveraged positions substantially smaller than ordinary investments.
5. Decide the maximum acceptable loss before entering.
6. Never average down solely because a leveraged fund looks cheaper.

For long-term semiconductor exposure, an unleveraged fund is the more forgiving instrument.

SOXL and KORU are short-horizon trading tools. They can be useful when the direction, timing and risk controls are all correct. They are much less suitable as passive investments held through months of unstable trading.

So, buy now or wait?

The semiconductor fundamentals appear healthier than the recent price action suggests. The forced selling documented in Korea and the broader reduction in hedge-fund exposure support the argument that leverage intensified the decline.

But that does not mean the deleveraging process is finished.

My preference is to begin cautiously with unleveraged semiconductor exposure while keeping substantial buying power available for Q3. For SOXL or KORU specifically, I would favor either a very small starter position or waiting until earnings and price action confirm that the market has absorbed the leverage unwind.

A better entry does not always mean a lower price. Sometimes it means paying slightly more after the risk of another forced liquidation has materially declined.

The semiconductor boom may still have years to run. Surviving its corrections matters more than catching the exact bottom.

This article is for informational and educational purposes only. It does not constitute individualized investment, legal or tax advice. Leveraged ETFs involve substantial risk and may not be suitable for all investors.