Fintech media app noticed a huge shift in tech investors' attitudes in the past month: software stocks are very popular, while semiconductor manufacturers are not.

Wall Street is exiting the chip industry due to high valuations and related risks from the trade war during the Trump administration. The president-elect has been outspokenly critical of the 'Chip Act' and pledged on Monday to impose additional tariffs on countries like Canada and Mexico. On the other hand, the software industry has been continuously rising. Investors are optimistic about this industry because it is less affected by tariff risks, and the driving force of artificial intelligence seems to be shifting from infrastructure to the service sector.

Bill Stone, Chief Investment Officer at Glenview Trust, said: 'The software industry has lagged behind but appears poised to be the next winner in artificial intelligence. If the new government becomes more lenient on regulation and mergers, the software industry may also benefit.' On the other hand, 'There is too much good news in the chip sector, especially in AI chips, as their valuations are already very high in times of increasing uncertainty.'

Recent financial reports have highlighted a shift in market sentiment. The stock price of data analytics software company Snowflake surged on strong forecasts, while the demand for AI software drove Palantir's strong performance. In contrast, even the strong performance of Nvidia failed to pique investors' interest.

As of November, a large exchange-traded fund tracking software has risen by 16%, potentially achieving the largest monthly increase in a year. Meanwhile, a semiconductor fund has risen by less than 1%. According to Bloomberg industry research data, the funds flowing into software ETFs far exceed those into chip funds.

Jefferies' stock trading general manager Michael Tumi said that this outstanding performance represents a 'record rise in the software industry relative to the semiconductor industry'. However, he said that this shift 'has left almost no trace on the 10-year chart,' indicating that there is still room for this trend to continue.

The extent of rotation will depend on the development of the situation under the Trump administration. Sean O'Hara, President of Pacer ETF Distributors, believes that 'chip manufacturers face a lot of uncertainty regarding tariffs.' This has created the possibility of volatility, especially as chip stocks have seen significant gains related to artificial intelligence. 'At the same time, I believe we will see more focus on artificial intelligence software,' he said.

So far, the benefits that the artificial intelligence theme has brought to chip manufacturers far outweigh software companies, with each company investing heavily in developing the chips and servers required to run this technology. At the same time, only a few software companies (such as Palantir, Microsoft, and Oracle) have seen significant bullish related to artificial intelligence. But software and services may be the next turning point for artificial intelligence growth.

At the same time, as the initial major beneficiaries of artificial intelligence trading, the valuation of chip manufacturers has also become expensive. The PHLX Semiconductor Index has a PE ratio of 24 times, higher than its 10-year average of 18 times, with stocks like ARM and NVIDIA having the highest valuations. If headwinds emerge, this could mean even greater downside risks, and NVIDIA's report indicates that more momentum may be needed to continue boosting the industry.

One thing for certain is that semiconductor stocks remain a popular growth area. According to Bloomberg Intelligence, chip companies' earnings are expected to increase by 40% by 2025, while earnings in the software and services sector are expected to grow by about 12%. Sales growth for semiconductor companies is also expected to be stronger.

The next major test for the software industry will come in early December when Salesforce announces its performance. Jordan Klein, a technology industry expert at Mizuho Securities, said the company has been actively recruiting talent to promote its new generative artificial intelligence agent product, and the company's strong performance will help sustain the industry's upward trend.

Post-election, generalist investors and technology investors face the dilemma of holding more software (and fintech) and holding fewer semiconductors,' he wrote. 'Missing out on these moves could put some people in trouble.'