Hedge Funds Shifting Focus: From Semiconductors to Software

Hedge Funds Shifting Focus: From Semiconductors to Software

Guilherme Silva
2 min read

Hedge Funds Shifting Focus: From Semiconductors to Software

Hedge funds have recently shifted their focus from semiconductor to software stocks, with semiconductors experiencing the most net sales and software the most net purchases. This change comes as the S&P Software and Services index had its strongest week since January, despite a 67% rally in semiconductor stocks this year. Analysts see potential for further gains in both sectors, but semiconductors still maintain a stronger upside momentum compared to software. The shift in hedge fund strategies was influenced by signs of slower growth in AI-related software stocks and robust demand for semiconductors, particularly for companies like Nvidia Corp. Despite the move towards software, experts like Will Tamplin of Fairlead Strategies believe that semiconductors are poised for further growth, indicating no clear shift in tech sector leadership yet.

Key Takeaways

  • Hedge funds shifted focus from semiconductors to software, with the latter being the most net bought.
  • S&P Software and Services index had its best week since January, while semiconductor stocks rallied 67% in 2024.
  • Analysts predict potential for further gains in both sectors, with semiconductors maintaining stronger upside momentum.
  • Software stocks rebounded due to better earnings and oversold positioning dynamics, signaling a buying opportunity.
  • Despite the shift, semiconductor stocks are poised for further growth, with strong upside momentum relative to software.


Hedge funds' pivot from semiconductors to software reflects a tactical adjustment amid sector dynamics. The S&P Software and Services index's strong performance, coupled with a 67% rally in semiconductor stocks, signals investor reevaluation of growth prospects. While software stocks benefit from earnings improvements and oversold conditions, semiconductors, led by firms like Nvidia, continue to exhibit robust demand. This shift could impact both sectors' valuations, with short-term volatility in software and sustained growth in semiconductors. Long-term, the tech sector's leadership remains contested, influenced by evolving AI trends and market demand.

Did You Know?

  • S&P Software and Services Index: This index tracks the performance of companies primarily involved in the development and management of software and IT services. It is a key benchmark for the software and services sector, reflecting the overall health and trends in this industry segment.
  • Net Sales and Net Purchases: In the context of hedge funds, net sales refer to the total value of shares sold by the fund, while net purchases indicate the total value of shares bought. When a sector experiences more net sales than purchases, it suggests a decrease in investment interest, and vice versa.
  • Upside Momentum: This term refers to the rate at which a stock or sector's price is increasing. Strong upside momentum indicates that the price is rising at an accelerating rate, which is often seen as a bullish signal by investors and analysts.

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