Christian Fromhertz
CEO of Tribeca Trade Group, Momentum Trader, Ex-BAML ETF Director
Semiconductor stocks face more unwinding because they are overcrowded, highly margined growth-at-any-cost positions, and that should continue until semi and AI chatter on X dies down. Underowned, lower-volatility areas such as regional banks, transports, medical devices and homebuilders are ripping, partly on earnings and partly on broad rotation. x.com x.comÂ
Tech and semiconductor bounces are mainly driven by less urgent hedge-fund selling rather than fresh buying. Per Goldman Sachs, tech is still being sold amid very low activity; there is no sign risk has been added yet. The unwind may be nearing its end, especially as hyperscalers stick to capex plans and Q3 semiconductor earnings look likely to be positive. Less crowded positioning and more normal multiples leave a healthier base for a longer-term rebuild. x.comÂ
At this stage of the AI cycle, the hyperscalers are better to own than semiconductors. The hyperscalers are the spenders, not the suppliers: if credit tightens and capex is cut, their free cash flow rises while chipmakers lose orders. Positioning also favors the hyperscalers, as long semiconductors is the most crowded trade in the latest BofA Global Fund Manager Survey, at 53%. x.comÂ
Semiconductors look attractive because SMH's largest volume since July is appearing as it defends last month's and last week's lows. This area is the concentrated spot for the ETF's largest institutional investment ever. x.comÂ
Semiconductors still look likely to lag on a risk-adjusted basis, even if Treasury intervention such as yield-curve control changes the broader picture. They should have been rallying hard this week and are not acting right for bulls, suggesting something is brewing, probably a capex disappointment. Hyperscalers may be closer to another leg up. x.com x.com x.comÂ
Semiconductor stocks' easy-money phase is over as the sector shifts from hype to show-me-the-money. The SOX index is down over 15% from its June peak, chip funds saw $11B of outflows in one week, the largest this century, short interest is at a three-year high and earnings growth is projected to slow by 2027. Memory and logic chips remain commodity-like. This is cyclical cooling, not a death knell; the AI build-out continues, but expect more turbulence and favor companies with defensive moats. … Show more
Semiconductors could capture scarce spot compute's value if its forward curve holds. Compute trades in deep contango, while chip stocks price in little of that value; near-term moves are unpredictable. That makes the sector very bullish. The earlier lab-funding risk looks less acute: Anthropic should hold nearly $200B cash after its IPO and is operating-cash-flow profitable. Even with 2029 capex cuts, chips look cheap if future buyers do not default. x.com x.com x.com x.com x.comÂ
Semiconductor and memory stocks face a correction as money rotates hard out of chip and memory hype into the Magnificent Seven and defensive names. The market had been trading on that hype, and the rotation is catching many newer traders offside. x.comÂ
Microsoft's position is the most crowded among the Magnificent Seven, and fund flows are against it as funds sell those stocks to reserve cash for Anthropic's IPO. It faded despite an excellent earnings report. x.comÂ
Semiconductors have a window to keep rising into the end of September, though this is repair, not a new era. A week ago almost nothing in the complex was above its short-term averages; now nearly everything is, and semis jumped from the bottom third to the top five of a breadth-weighted sector leaderboard as money left defensives. The macro regime flipped to risk-on mid-move. But no name is at a new high, and fading daily liquidity points to October chop and a real cooloff by mid-month. x.com … Show more
Semiconductor sentiment is far too ebullient for a squeeze. Semi short interest is tiny and put-call ratios are about as bullish as they get, so the market shows no disbelief. x.comÂ
