Crowded Semis, Hated SoftwareThe positioning dislocation between semis and software remains extreme. Investors continue crowding aggressively into semis and AI hardware while software positioning remains heavily depressed despite improving fundamentals, accelerating growth, and expanding margins.Software remains one of the few major AI-adjacent groups still heavily underowned. If semis finally start losing momentum, the unwind of one of the market’s most crowded trades could quickly fuel a violent rotation into software.The Jaws gapThe dislocation between semis and software remains huge.Source: JPMShortsShorts "herding" in software, while semis shorts are hovering near recent lows. Short squeeze risk is building rapidly in software, now sitting at the 100th percentile versus the past six years.Source: JPMPlay semis downsideJPM likes buying SMH downside protection here. Chart 2 shows the SMH June 550/500 put spread, chart 3 McElligott's favorite play in SMH, the June 1x3 ratio put spread.Source: LSEG WorkspaceSource: LSEG WorkspaceIGVIGV has bounced aggressively since hitting major range lows some weeks ago. Software has consolidated over the past week, but continues inching higher.A close above $92 could re-ignite the squeeze. Note we are already back above the 100 day MA.A sell-off in semis could create a bid for software as investors unwind the pairs trade and/or rotate into a relatively cheaper part of tech.Source: LSEG WorkspaceIGV upsideIt is worth looking at the upside here given the still-negative positioning in a group experiencing accelerating revenue growth and expanding margins according to JPM market intelligence.One way to express the view is via upside optionality. Chart shows the IGV June 95/102 call spreads, max around 4x.Source: LSEG Workspace