For the better part of 2026, the playbook was simple: buy chips, sell software. Ride the AI wave on the hardware side, bet against the legacy software names getting disrupted by it.
Hedge funds have now sold US semiconductor stocks for four consecutive weeks as of early July, marking a sharp reversal in what had been the most crowded tech trade of the year. The semiconductor-to-software performance gap, which hit extreme highs earlier in 2026, is now compressing fast.
The unwind in numbers
Memory makers have taken the worst of it. Micron and Sandisk saw single-day drops exceeding 10-14% during June. Even Nvidia declined roughly 3-6% across multiple trading sessions in the same stretch.
On the other side of the trade, software stocks haven’t exactly rallied to fill the gap. Anthropic’s tool announcements back in February triggered notable drops across the software sector, setting a tone that hasn’t fully lifted.
