Ceasefire Drives Rotation Into Semis

A two-week U.S.–Iran ceasefire has triggered a broad risk-on rally, lifting major equity indices while pressuring oil. Within technology, performance is diverging between semiconductor and software exposures as capital tracks shifting perceptions of geopolitical and macro risk.

Semiconductor-focused ETFs such as SMH, along with peer vehicles like SOXX, tend to benefit when de-escalation supports global capex and AI infrastructure spending. In similar de-escalation phases in 2016, 2022 and late 2023, chip-linked benchmarks outpaced software indices such as IGV for several weeks.

Hardware leaders embedded in semiconductor ETFs, including NVIDIA (NVDA), Taiwan Semiconductor (TSM), Advanced Micro Devices (AMD) and ASML (ASML), typically capture flows when investors prioritize AI GPUs, foundry capacity and lithography tools over long-duration software growth. That bias often coincides with stable-to-firmer yields, which historically weigh more on high-multiple software than on profitable semiconductor cyclicals.

Historical episodes suggest that when geopolitical stress eases and macro conditions favor industrial and data-center capex, semiconductor outperformance versus software has persisted for 2-8 weeks before normalizing. The durability of the current rotation will likely hinge on whether the ceasefire marks a lasting de-escalation and whether AI and manufacturing investment expectations remain intact.