Software Stocks Achieve Historic Outperformance Against Semiconductor Sector

The Kobeissi Letter posted on X. Software stocks have recently experienced a significant surge, with the Tech-Software ETF, $IGV, outperforming the Semiconductor Sector ETF, $SOXX, by 16.59 percentage points over the past six trading sessions. This marks the largest six-day outperformance on record. During this period, $IGV has rallied by 8.37%, reaching its highest level since February 2nd, while $SOXX has declined by 8.22%, nearing its lowest point since February 5th. This development represents a notable reversal from the end of January when software stocks underperformed by nearly 15 percentage points, the largest gap since 2008. The recent surge in software stocks coincides with an increase in hedge fund short exposure to U.S. software and services stocks, which reached a record 3.8% last week. As a result, a short squeeze in software stocks has occurred, contributing to their historic outperformance against the semiconductor sector.