The Software Rotation

The report highlights a potential rotation from overextended semiconductor stocks into the software sector, which has seen a 33% bounce from April lows but remains fundamentally under-positioned.

Key Takeaways

• 1.The software rotation thesis is playing out, with the IGV ETF rallying approximately 33% since mid-April.
• 2.Relative performance between semiconductors and software is starting to shift; while semis have dominated over the past year (+165% vs flat), software has recently begun outperforming.
• 3.Short positioning in the software sector is at an extreme (100th percentile vs past 6 years), creating a high risk of a rapid short squeeze.

Table of Contents

• The Software Rotation
• Nothing beats semis
• Zooming out
• The rotation
• Shorts
• Learn to love convexity

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