Hello TheoTrader,
Nvidia crushed earnings estimates last week. The stock tanked into Friday's close anyway.
Everyone panicked. But they panicked about the wrong thing.
Money is not leaving tech. It is rotating within tech.
A major divergence has been building across tech subsectors for months. Nvidia's pullback looks like the match that lights it off.
I am going to show you where the money is heading next.
The "software is dead" narrative has it backwards.
Is the "Software Is Dead" Story Overdone?
The tech sector contains dozens of smaller subsectors. Software, semiconductors, computer hardware, electrical components, and quantum computing all fall under the same umbrella.
They do not move in lockstep.
Over the past few weeks, the narrative has turned aggressively against software. AI will replace coders. Software companies carry too much fat.
I have heard this story before. Growing up in Michigan, everyone declared manufacturing dead. The advice back then was simple. Learn to code.
Now the pendulum has swung the other way. Narratives always overshoot.
Here is what the doom crowd keeps ignoring. Software job openings have actually started climbing again.
The data contradicts the extinction story. AI makes developers more productive. It does not eliminate the need for them.
Peak pessimism in any sector tends to cluster right near the bottom. That does not mean I am rushing in to buy software names today.
Still, the buying opportunity will arrive sooner than most people expect.
Sentiment extremes and sector drawdowns tell the real story right now:
- Software stocks have pulled back over 20% year-to-date. That erased the entire 2025 rally.
- The narrative around AI replacing software jobs has hit peak saturation. Historically, that marks sentiment bottoms.
- Job openings keep ticking higher even as stock prices fall. That kind of fundamental divergence tends to resolve to the upside.
Price gets crushed while the underlying data quietly improves. The crowd looks one way. The money eventually flows the other.
Where the Money Goes Next
Quantum computing has my attention again. The sector went through a multi-month pullback. Most of the speculative excess has been shaken out.
This exact pattern has played out multiple times since I started covering the space a couple of years ago. A big run. A painful correction. Then another leg higher once the weak hands get flushed.
The setup comes down to one thing.
Semiconductor stocks need to trade sideways for a sustained period. That would signal the momentum trade in chips has run its course.
Once that happens, money within tech tends to rotate into the sectors left behind. Software and quantum computing sit at the top of that list.
The Trinity Terminal has already started flagging early signals in some of these overlooked names. Rotations always start the same way. The signals show up before the headlines do.
Two things matter above everything else right now.
This market lives and dies by tech. That has not changed. Meanwhile, sector rotation fuels bull markets.
That applies just as much to the subsectors within tech as it does to the broader market.
Everyone fixated on Nvidia's earnings reaction missed the bigger picture. The real story is where the money goes next.
Positions matter more than opinions. Get ready.
Gianni Di Poce
THEOTrade