Forget The Chip Boom: Wall Street's 'Ultimate Contrarian Trade' Favors Software For 2026
Forget The Chip Boom: Wall Street's 'Ultimate Contrarian Trade' Favors Software For 2026
Anusuya LahiriSun, April 19, 2026 at 7:31 PM UTC
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Technology sector leaders across software and semiconductors are approaching a potential inflection point, as BTIG Chief Market Technician Jonathan Krinsky outlines a contrarian shift favoring software over chip stocks.
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Krinsky said the spread between software stocks in the S&P 1500 and semiconductor stocks in the SOX index has reached an unprecedented level, with the ratio falling 43% below its 200-day moving average.
The software stocks in the S&P 1500 include Oracle Corp, Microsoft Corp, Palantir Technologies Inc and Salesforce, Inc.
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The semiconductor stocks in the PHLX Semiconductor Sector or the SOX index include NVIDIA Corp, Broadcom Inc, Taiwan Semiconductor Manufacturing Co Ltd and Micron Technology Inc.
He noted that this gap is the widest in BTIG’s dataset, exceeding levels seen during both the build-up to and aftermath of the dot-com bubble, calling the setup “off the charts” and a key starting point for a potential reversal.
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Software Charts Indicate False Breakdown and Rebound
Krinsky pointed to technical signals in software stocks, highlighting the iShares Expanded Tech-Software Sector ETF as a key indicator. The ETF’s holdings include Oracle, Microsoft, Palantir and Salesforce.
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He said the ETF had tested the $77 level multiple times before breaking below it, only to recover quickly. Krinsky described this move as a “false breakdown,” adding that such patterns often lead to sharp moves in the opposite direction. He also noted signs of capitulation during the decline, reinforcing his view that software stocks are poised for a meaningful rebound.
Semiconductor Momentum Faces Downside Risk
Krinsky contrasted this with semiconductors, describing the group as an “untouchable trade” that has been difficult to bet against. However, he warned that certain segments, particularly memory stocks, have seen parabolic gains. He said such moves typically reverse sharply, suggesting semiconductor stocks could face downside pressure as momentum unwinds, setting up a broader rotation back into software.
Photo: Shutterstock
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