To The Moon

$VanEck Semiconductor ETF(SMH)$ $iShares Expanded Tech-Software Sector ETF(IGV)$  $NVIDIA(NVDA)$ 2Jan26 🇺🇸|3Jan26 🇳🇿

📊 This is rotation on tape, not theory

I’ve learned over decades that the first trading sessions of a new year often reveal the real leadership map. Early 2026 has done exactly that. We are seeing record outperformance of semiconductors versus software, with $SMH decisively outperforming $IGV. This is not sentiment noise. It is capital rotating toward the physical constraints of AI scaling.

🧠 The regime shift is structural

The long-term $SMH versus $IGV relative chart has already done the hard work. Hardware broke out of multi-year equilibrium during 2023 to 2024 and has refused to give it back. Every 2025 pullback, including geopolitical and tariff scares, resolved higher. Volatility expanded with trend, not exhaustion. That is regime behaviour. Early 2026 is simply confirming what structure has already declared.

⚙️ Inference now controls the spend

The market is quietly acknowledging a major transition. AI inference, not training, is now driving capital allocation, accounting for the majority of forward capex. That shifts pricing power decisively toward memory bandwidth, networking, interconnect, and power-efficient silicon. Software leverage matters less when models cannot run at scale without physical throughput. This is why the leadership is broad and durable.

📈 Breadth confirms institutional intent

Today’s semiconductor tape was deeply green across the ecosystem, which is always my tell for mandate-driven flows.

$NVDA continues to anchor the stack as Blackwell ramps and forward visibility remains intact.

$AVGO is accelerating on custom silicon and networking dominance.

$AMD is gaining traction with open-standard rack-scale solutions.

$MU has quietly become a bottleneck asset, with HBM effectively sold out into 2026 and memory back at the centre of the AI equation.

This level of participation does not come from retail enthusiasm. It reflects institutional repositioning into compute scarcity, memory walls, and interconnect chokepoints.

📊 Why $SMH is the cleanest expression

$SMH remains structurally strong, up more than +53% over the past year, holding a clear sequence of higher highs and higher lows. Liquidity is deep, exposure is diversified, and it aligns cleanly with allocator mandates. When leadership rotates early in a regime, capital often expresses conviction through the ETF first before dispersing into single names. That pattern is playing out again.

💻 Software starts 2026 on the back foot

By contrast, $IGV is down roughly -2.6%, its worst session since Thanksgiving. The daily chart shows a sharp downside impulse, negative rate-of-change expansion, and momentum rolling over. This is not the death of software. It is a repricing of where operating leverage actually lives in the AI stack right now.

🧩 The hard truth beneath the move

Models do not scale on code alone. Intelligence demands memory, power, packaging, fabrication, and relentless capital expenditure. Hardware is no longer the quiet layer beneath the story. It is the constraint, and markets are pricing that reality with increasing urgency.

2026 is not asking whether silicon leads.

It is deciding how much of the decade belongs to it.

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