Hedge funds snapped up U.S. semiconductor stocks at the fastest pace in at least three-and-a-half years last week, reversing course after two consecutive weeks of heavy selling as investors bet the sector’s recent pullback has run its course.

Hedge Fund Exposure Rebounds

Hedge funds’ allocation to U.S. semiconductor stocks has climbed back to about 10% of total hedge fund exposure, according to Goldman Sachs data shared by The Kobeissi Letter on Monday.

The figure is roughly double the level seen during the same period last year, though it remains below the nearly 14% peak reached in May.

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Semiconductor Selloff Seen as Over

The market commentator said the latest positioning showed that hedge funds are betting the recent selloff in semiconductor stocks has already run its course.

The buying spree comes after the sector pulled back from recent highs despite continued investor focus on artificial intelligence infrastructure spending and demand for advanced chips.

ETF Inflows Signal Broad Demand

The iShares Semiconductor ETF (NASDAQ:SOXX) attracted a record $5.4 billion in a single day on July 7, while U.S. semiconductor ETFs collectively pulled in $7.1 billion, as investors bought the dip in AI-related chip stocks.

The fund has $47.60 billion in assets under management and charges an expense ratio of 0.34%. It has returned 76.48% year-to-date and 27.05% over the past year.

The VanEck Semiconductor ETF (NASDAQ:SMH), which holds Nvidia Corp. (NASDAQ:NVDA), Broadcom Inc. (NASDAQ:AVGO), Advanced Micro Devices Inc. (NASDAQ:AMD), and Taiwan Semiconductor Manufacturing Co. Ltd. (NYSE:TSM), has $73.70 billion in assets and charges an expense ratio of 0.35%. It has gained 56.88% year-to-date and 105.25% over the past year.

Direxion Daily Semiconductor Bull 3X ETF (NYSE:SOXL), which has $12.44 billion in assets and charges an expense ratio of 0.75%, has returned 250.06% and 524.04% so far this year and over the past year, respectively.

Price Action: SOXX fell 4.77% on Monday at $553.61 and closed at $566.46 in extended trading.

Benzinga edge rankings indicate SOXX has a Momentum score in the 96th percentile and a positive price trend across the short, medium and long term.

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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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