The semiconductor selloff has deepened, but investors keep throwing money at the sector. Semiconductor exchange-traded funds (ETFs) are on pace for a record year of inflows, according to data highlighted by The Kobeissi Letter.

The financial markets newsletter, citing BofA Global Research and Bloomberg, said semiconductor ETFs have attracted $46 billion in net inflows so far in 2026—about 31% of the group's total assets under management (AUM) and more than double the combined inflows recorded from 2017 through 2025. Cumulative inflows since 2017 have reached a record $68 billion, including another $2.3 billion added last week.

The surge in inflows comes even as the iShares Semiconductor ETF (SOXX) has fallen 20.3% from its June 2 peak, officially entering bear market territory. The Roundhill Memory ETF (DRAM), which skyrocketed from its April launch to peak at $80.72 on June 22, is down roughly 35% since then.

Record ETF inflows reflect investor confidence that semiconductors remain a key way to capitalize on the AI boom, fueled by heavy spending on AI data centers, advanced chips and cloud infrastructure.

The Biggest Beneficiaries

• The VanEck Semiconductor ETF (SMH) remains the largest and most widely followed fund in the space, with concentrated exposure to AI leaders such as Nvidia Corp (NVDA), Taiwan Semiconductor Manufacturing Co Ltd (TSM) and Broadcom, Inc (AVGO).
• The iShares Semiconductor ETF provides broader exposure across U.S. semiconductor companies, while the SPDR S&P Semiconductor ETF (XSD) offers an equal-weight approach that reduces reliance on mega-cap names.
• In addition to the Roundhill Memory ETF, other notable funds include the First Trust Nasdaq Semiconductor ETF (FTXL) and the Invesco Dynamic Semiconductors ETF (PSI).

Technicals Point to Stabilization, Not Yet a Breakout

While semiconductor ETFs continue to attract record inflows, their technical indicators suggest investors are still waiting for a decisive confirmation that the recent correction has run its course.

Among the largest funds in the space, the VanEck Semiconductor ETF (SMH) is showing the strongest technical setup. Its Relative Strength Index (RSI) is 45.15, comfortably above oversold territory yet well below the overbought threshold of 70, indicating neutral momentum with a slight bullish bias.

More encouragingly, SMH's MACD has crossed above its signal line and the histogram has turned positive, an early indication that selling pressure is easing. However, both the MACD and signal line remain below zero, suggesting the ETF has yet to establish a confirmed bullish trend.

The iShares Semiconductor ETF (SOXX) presents a similar, albeit weaker, picture. Its RSI of 39.64 points to subdued momentum without signaling oversold conditions. Like SMH, SOXX has registered a bullish MACD crossover, with a positive histogram indicating that downside momentum may be fading. Still, both the MACD and the signal line remain in negative territory, reflecting a market attempting to stabilize rather than launch into a fresh uptrend.

For investors, the divergence is notable. Fund flows and industry fundamentals remain overwhelmingly positive, driven by sustained AI infrastructure spending and strong earnings from leading chipmakers. The charts, however, indicate that semiconductor ETFs are in the early stages of a technical recovery, with momentum improving but not yet confirming the next leg of the rally. This suggests investors remain focused on the long-term AI opportunity even as the sector consolidates after a powerful run.

Fundamentals Continue to Support the AI Trade

The technical strength is backed by robust industry fundamentals.

Unlike previous semiconductor cycles driven largely by smartphones and personal computers, the current upcycle is being powered by enterprise AI infrastructure spending. Companies including Nvidia, Broadcom, Advanced Micro Devices Inc (AMD), Micron Technology Inc (MU), TSMC and SK hynix Inc (SKHY) continue to benefit from strong demand for AI accelerators and memory, while hyperscalers such as Microsoft Corp (MSFT), Amazon.com, Inc (AMZN), Alphabet, Inc (GOOGL) and Meta Platforms, Inc (META) have collectively committed hundreds of billions of dollars toward expanding AI infrastructure.

That combination of strong earnings growth and record ETF inflows has reinforced investor confidence in the sector. However, after a historic rally, future gains are likely to depend less on multiple expansion and more on companies' ability to continue delivering strong revenue and earnings growth.

For investors seeking diversified exposure to the AI investment theme, semiconductor ETFs remain among the most popular vehicles. But with technical indicators suggesting the sector is becoming increasingly extended, the record inflows also raise the question of whether investors are chasing momentum—or positioning for the next leg of the AI boom.