Semiconductors Vs Software

First up, a huge thank you to all our readers. We have hit the 80,000 subscriber milestone! 🎉 I still remember feeling very chuffed when we got our first 500 blog readers after a few months, back in 2016. Thanks for all the feedback, questions, Trustpilot reviews and, yes, even the criticism. It all helps us to get better ❤️ If you like what we do and can recommend us to a friend we’d be hugely grateful.

AI and IPO – 5 letters moving markets

This week, I’m thinking – yet again – about AI. As well as soaring markets, there are three major Initial Public Offerings coming up in 2026 fuelled by AI Kool-Aid. Three massive companies will become tradable on a public stock exchange, swapping their shares for our cash to fund their growth. SpaceX (covered in some detail last week) is aiming to raise about $75bn at a $1.75tn valuation. OpenAI is reported to be raising $60 billion at a price tag of around $852bn, and Anthropic (Claude’s Mommy) has just completed a private $65bn funding round at a $965bn valuation and will detail its IPO ambitions in the coming months.

Investors are already scrambling to get a slice of the action. Us mere grockles have been limited to getting indirect exposure to AI for years – we’ve been buying the chips which power this via semiconductor stocks such as Nvidia. But soon we’ll be able to own a slice of the infrastructure and products directly.

These three IPOs will soak up a lot of investors’ money and change the face of the technology sector again. But before this all kicks off, if we look in the rear-view mirror over the last 12 months, there has already been a major chasm develop in the sector – one side is winning and one is losing.

Welcome to the Semiconductors Vs Software (and the score is 40-love)

The Nasdaq is a tech-heavy collection (or ‘index’) of about 3,300 companies listed in the US. It has risen by about 16% since 1 January this year. However, there’s a tech seesaw hiding in here. At one end, the S&P Software and Services index is down about 8%, and at the other, the S&P Semiconductor Select index is having a lovely time, up about 92% since we sang Auld Lang Syne. You can read more in our new feature piece.

In a nutshell, ‘boring’ old software is facing an existential crisis as AI threatens its purpose. Businesses can now bypass some traditional paid-for software. Across the chasm, AI giants are gobbling up chips like hungry wolves. This week, we saw two more companies pass the $1 trillion valuation mark – memory chipmakers Micron Technology and SK Hynix. Gobble gobble gobble.

It’s frothy in space

Another hyped sector is space, turbo-charged by Musk. Seraphim Space Investment Trust is up 78% in 3 months; VanEck’s Space Innovators Trust is up about 67%. SpaceX owners Scottish Mortgage has surged and is trading at a premium again.

These are difficult times to invest from a psychological perspective. We become driven by fear (fear of missing out) and greed. And convince ourselves that this is normal behaviour. But markets at the moment are not normal.

Balancing the potential for these hugely innovative, exciting firms against the boring old truisms of investing – diversify, own lots of different shares and sectors, have enough cash so you’re never a forced seller when prices are hammered – is difficult.

If you want to have a play with these very concentrated and risky investments, I would set aside a small % of your savings for this. Maybe 5%? Be disciplined. IPOs are risky and investing in space is very risky. Keep most of your money in more boring stuff. More broadly, keep an eye on AI concentration – how much of your total retirement savings lie in the hands of just 7 giant tech stocks? (Clue: for most pre-retirement readers, it will be between around 25% - 40%). Your investment platform will show you the top 10 holdings for most funds – have a look under the bonnet.

Momentum is a very powerful force in markets and I think this ‘Melt Up’ stage has a while to play out yet. But be cautious. Icarus had a bad time when he flew too close to the sun. He would have had a worse time if he’d tried to fly to Mars.

This week I’ve focussed on trying to make more of our money. For those who are more worried about the impact of giving too much of it away, we’re bringing you a dedicated webinar on Inheritance Tax at 12 pm on 25th June. I’ll be joined by Harry Beddoe, a Financial Adviser from financial planning firm Ascot Lloyd, to take all your questions. You can find out more and sign up (free of charge) here.

Have a great weekend, everyone.

Holly