Semiconductor stocks are experiencing substantial outflows as capital redirects to software and the broader S&P 500 outperforms the chip sector, according to Bruce Campbell, portfolio manager at StoneCastle Investment Management.
Money flows data shows investors are rotating into software while reducing exposure to semiconductor equipment and optics. Hardware overall saw balanced inflows and outflows, indicating the divestment is concentrated in semiconductors rather than a broad tech retreat.
Campbell's analysis of performance since 2015 reveals a clear pattern: when the S&P 500 outperforms semiconductor stocks, the index delivers average returns just below 10 percent. When semiconductor stocks lead, the S&P 500 averages returns above 20 percent—suggesting a risk-on environment.
Broader sector rotation supports this rotation. Utilities are improving as interest rates decline. Canadian financial stocks are recovering from recent weakness. U.S. healthcare is showing early signs of decline while energy remains relatively strong.
Campbell's analysis does not signal an imminent market correction. Instead, it reflects a recalibration where different sectors—rather than semiconductor strength—are now driving equity performance.
