Trade overview: Semiconductor short

Two weeks ago, I laid out a clear macro-to-micro framework: the most crowded trade on the Street had shifted firmly into global semiconductors and cracks were starting to appear.

Today I thought we would look at my execution through the trade, mistakes I made, what I could have done better, what hints and alpha/edge moments came along the way to allow for this great contrarian trade.

The blog post in question in case you missed it:

Trade overview: The great rotation

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Jul 1

I was about to start a blog about the next batch of questions, but found myself researching quite deeply into certain ideas and market dynamics that I thought we would talk about first before continuing.

Semi conductors were and still are one of the most cyclical, capex-heavy, and now most concentrated corner of the entire market.

• Top 10 names are ~40% of the S&P 500 (double a decade ago, above dot-com levels), throwing off only ~32% of earnings.

• Euphoria: Historic inflows into US tech/semiconductor ETFs and Korea with much of the capital flowing into pure speculative products via leveraged products and memory names.

• Flows into AI were/are coming from selling the rest of the market, a cycle of selling to chase after the hottest theme taking an end.

• Momentum factor was, represented by AI names was at a 5 standard deviation from its mean, a massive hidden euphoric level.

The thesis was simple: good news failing to rally the tape in Korea via the MU 0.00%↑ earnings started to stall the space. MU has a massive beat and got sold back into a full gap fill within 30min. Massive selling right at the news was best got me to speculate that the good news was now fully priced in. MU doing this specifically was important because it represents Memory, of which the Korean market is made out by over 50%.

Thus a breakdown of memory would start to flush out Korean players, which themselves would create pressure on semis as a whole and could start the dominos falling. All starting with MU, then leveraged korean ETFs like KORU, followed by leveraged longs in SOXL, triggering broader rotation, and opening the door for everything else (EM, Crypto, small caps, growth ex-AI) that had been starved for capital.

Here is what actually unfolded since July 1, 2026: with fresh datapoints, macro actions, flows, volatility, and breaking news along the way and most importantly my executions.