Smart money continues to buy:
According to Goldman Sachs, the chip sector ETFs $SMH and $SOXX recorded their largest monthly inflow of funds since the launch of the $SMH fund – with over $13 billion flowing into them.
This data is important because it shows a gap between what prices are doing and what large investors are actually doing.
What can be learned from this?
When a sector has fallen by tens of percent, but at the same time attracts unprecedented investment volumes – it means that a large portion of institutional investors see the declines as an opportunity to increase positions, rather than a sign that the long-term trend has ended.
The assessment of these investors is that the demand for artificial intelligence infrastructure is still very strong – this includes chips, memory, servers, optical communication, and data centers, areas that continue to benefit from massive investments by large technology companies.
Institutional money typically does not act out of emotion or momentary fear – when billions of dollars flow into a sector – it is an indication that large entities are looking years ahead and not just at the volatility of recent weeks.
It is possible that volatility will continue in the near term, but the data shows that confidence in the growth story of the AI revolution still exists, and is even strengthening among some of the market's largest investors.