Editor's note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don't have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.

A post-April bounce has lifted tech stocks—but is the rebound real, or just a pause before more pain?

After a bruising April, the technology sector has shown signs of stabilizing. Several bellwether tech firms posted better-than-feared earnings, and the AI investment narrative remains intact.

Still, big-cap tech names are underperforming so far in 2025, a rare thing to see in recent years. The Bloomberg Magnificent 7 Index* is trailing the S&P 500 Index* year to date, according to Bloomberg.

“Whether Big Tech can re-establish its historical dominance in 2025 is the existential question facing investors as they start positioning for the back half of the year,” Bloomberg reports.

Traders watching for a decisive next move are weighing fresh macro signals—like tariff talks and potential Federal Reserve cuts—against ongoing risks ranging from inflation to geopolitics. For those with a tactical mindset, the tech setup is anything but settled.

Bulls Rebooting? Big Tech Could Be Uploading a Comeback

Several of the biggest names in the Technology Select Sector Index* delivered strong quarterly results, reinforcing the resilience of secular trends like AI, cloud computing, and enterprise software. The demand for AI infrastructure continues to drive capital spending from both hyperscalers and chipmakers, with some firms raising guidance even amid macro uncertainty.

Below is a daily chart of the Technology Select Sector Index as of May 19, 2025.

Source: TradingView.com, as of May 19, 2025.

Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.

The performance data quoted represents past performance. Past performance does not guarantee future results.

Beyond earnings, there are early signs the macro environment could turn more supportive. Recent tariff walk-backs may ease trade tensions just as the Fed signals possible rate cuts in the back half of the year—potentially creating a tailwind for high-growth sectors. Historically, the second half has been seasonally strong for tech, often driven by Q3 product cycles, end-of-year software renewals, and consumer electronics demand heading into the holidays.

Importantly, leadership may also be broadening beyond the Magnificent 7. Semiconductors, select software names, and even some mid-cap innovators have started to outperform, hinting at a potential rotation within tech—not just a narrow bounce.

Bearware Detected: Inflation, Layoffs, and Geopolitics in the Code

Despite the rebound, investors haven’t forgotten April’s sharp drawdown. That selloff left a mark, and while some stocks have recovered, others remain well below recent highs. Valuation remains a potential obstacle for many traders—especially if inflation proves sticky or rate cuts are delayed.

“The flipside of this optimism is the reality that tech stocks have had a massive runup over the past few years, and with the economy in flux, the risk is these shares could have much more room to fall,” according to the Bloomberg report.

Then there’s the policy backdrop. Regulatory pressure continues to build, particularly around artificial intelligence, antitrust, and data privacy. Add in renewed geopolitical tensions—especially U.S.-China tech trade friction—and there’s no shortage of potential catalysts for volatility.

Layoffs from several large tech firms have also raised concerns about slowing consumer demand and enterprise caution. In short, while the bounce is real, the risks haven’t gone away.

Trade Setup: Positioning with TECL and TECS

Traders who believe the tech rebound has more room to run may consider the Direxion Daily Technology Bull 3X Shares (Ticker: TECL). TECL seeks daily investment results, before fees and expenses, of 300% of the performance of the Technology Select Sector Index—offering daily magnified exposure to large-cap U.S. technology stocks.

On the other hand, if you expect renewed weakness, policy headwinds, or macro disappointment to drag tech lower, the Direxion Daily Technology Bear 3X Shares (Ticker: TECS) offers an inverse approach. TECS seeks daily investment results of 300% of the inverse (or opposite) of the Technology Select Sector Index.

Both TECL and TECS are leveraged ETFs designed for short-term tactical trading, not long-term investing. Due to daily rebalancing, returns over periods longer than a single day can differ significantly from 3x or -3x the index performance.

As the tech sector continues to work through competing narratives—AI-fueled optimism vs. macro-driven caution—directional traders have tools at their disposal. Whether this is a bottoming process or a short-lived reprieve, TECL and TECS offer targeted vehicles to express high-conviction views.

*Definitions and Index Descriptions

An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.

The “Technology Select Sector Index” is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Rafferty Asset Management, LLC (“Rafferty”). Standard & Poor’s^® and S&P^® are registered trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow Jones^® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Rafferty. Rafferty’s ETFs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the Technology Select Sector Index.

Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. A Fund is non-diversified and includes risks associated with the Fund’s concentrating its investments in a particular industry, sector, or geography which can increase volatility. The use of derivatives such as futures contracts and swaps are subject to market risks that may cause prices to fluctuate over time.

Leverage Risk – Each Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation or inverse correlation with the Index and may increase the volatility of the Fund.

Daily Index Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with the Index and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Daily Inverse Index Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with the Index and therefore achieve its daily inverse leveraged investment objective. The Bear Fund’s exposure to the Index is impacted by the Index’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to the Index at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to the Index increases on days when the Index is volatile near the close of the trading day.

Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices.

Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Market Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Other Investment Companies (including ETFs Risk), Cash Transaction Risk, Passive Investment and Index Performance Risk and for the Direxion Daily Technology Bear 3X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.

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