SOX Surges 88% in Single Quarter, JPMorgan Suggests De-leveraging Positions

According to TechFlow Research, JPMorgan's latest Global Semiconductor Weekly Report noted that the Philadelphia Semiconductor Index gained 88% in the second quarter, marking the strongest single-quarter performance in the index's history. However, institutions assess that this rally is unsustainable unless earnings materialize or the growth rate of cloud providers' capital expenditure truly slows down. Positioning data shows that momentum factor holdings have declined 17% from their June highs. After crowded long positions in hardware semiconductors outperformed crowded short positions by nearly 40 percentage points in June, consecutive net selling emerged in July. The overall US equity positioning percentile dropped from the 60th percentile to the 40th percentile within a month.