Semis: The Most Crowded Trade On The Street
Sexy SOX
SOX still very much inside the great trend channel. Note the index has been consolidating over the past weeks. First bigger support comes in right around the 50 day MA.
Source: LSEG Workspace
The gap
SOX vs IGV gap beyond wide. SOX has beaten semis by 150% over the past 5 years.
Source: LSEG Workspace
Positioning
GS Prime book exposure to software has collapsed from roughly 17% at the highs to just 2% today. Meanwhile, semis exposure has surged from around 2% to nearly 10%, approaching prior peak levels.
Source: GS
89% vs 0%
Semis: 89% above the 200-day. Software: 0%.
Source: Bloomberg/Kevin Gordon
SOX Boom/Bust
The SOX’s 32-year history shows a sector that is cyclical but structurally rising, every bust has set a higher floor. Booms average 41 months and +309%, while corrections last 11 months and retrace ~48%. The current AI cycle, at ~40 months and +271%, is statistically mature but not necessarily over.
The real risk isn’t duration, it’s valuation and demand concentration. The longest, most durable runs were driven by broad, multi-end-market demand. Whether AI expands beyond training into inference, edge, robotics, and enterprise adoption will decide if this cycle extends, or ends like 2000 and 2021. Chart shows longer term relative valuation. (Stats via Goldman's Kapta)
Source: GS
Semis pullback?
"Semis & Semi Equip has been by far the most net bought subsector on our PB pad YTD – if AI disruption continues to cause investors to take down risk, we think Semis looks extremely crowded. With 1-month 5d/25d put skew looking highly elevated, we also like put spreads in SMH to play for a more targeted pull back". (GS)
