Guess who’s back, back again? Controversially, Eminem, but also software stocks — which are reclaiming their place in investors’ hearts, stealing the spotlight from semiconductors, the previous stars of this year’s market gains. Hedge funds, which had been cooling off on software and dropped to their lowest level in over five years, are now showing renewed interest.

• Recently, fund managers have been offloading US tech stocks for three weeks straight — hitting semiconductors the hardest while ramping up their investments in software companies.
• The BVP Nasdaq Emerging Cloud Index, which tracks major cloud software firms, has fallen by 1% over the past year — while the Nasdaq and S&P 500 are up 31% and 25%, respectively.

Has software pulled a Houdini? Many software stocks are still trading well below their 2021 peaks. Take ShopifySHOP

, for example, which has seen a  ~150% rise since its lowest point in 2022 but still hasn’t reached its peak from 2021 — remaining 62% below its 2021 record high. However, some software companies are achieving new highs, like cybersecurity provider CrowdStrikeCRWD

, which has soared by 55% this year and recently joined the S&P 500.

Despite the mixed performance, Evercore ISI’s Richard Ross sees the low sentiment around software as a golden opportunity for investors — and continues to recommend semiconductor stocks alongside software for a balanced portfolio strategy.