After last month’s pullback, it’s clear the Nasdaq has basically held steady. The daily uptrend structure is still intact, and it hasn’t broken below the 50-day EMA, so the overall trend looks very good.

However, the semiconductor sector is not nearly as optimistic. Yesterday, SOXX’s rebound gained by less than 3%, and today, in pre-market trading, all of those gains have fallen back again. The market is also flooded with all kinds of bearish “little pieces/articles” that are written like news blurbs—there is a lot of noise.
From my own investment framework, right now I only care about two indicators when investing in semiconductors.
One is technicals. Before the SOXX index breaks below its 50-day moving average, there is no reason to turn bearish on the semiconductor sector.
The other is fundamentals. Before big tech releases its earnings reports and confirms cuts to AI capital expenditure, there is also no reason to turn bearish on the semiconductor sector.
So far, I haven’t seen any substantial bearish catalysts. The reason for the decline can only be attributed to deleveraging at market highs. You can even reasonably suspect that some institutions are putting out these little bearish “articles/posts” to spread panic, washing out the not-so-committed positions, and then timing it to buy the dip at lower levels.
That said, if you observe the market over the past few months, you can summarize an interesting pattern: whenever the hardware sector pulls back from its highs, the software sector tends to show a rebound from lower levels. In short: hard things turn soft, and soft things turn hard—the two have a bit of a seemingly incompatible, water-and-fire relationship.
At this time, it may be worth allocating to some high-quality software stocks, such as Microsoft, Palantir, and ServiceNow. This is both a hedge against semiconductor risk and a way to capture potential short-term rebound gains in software.
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