Jim Cramer Calls the Chip Trade Broken, but Semiconductors Are Still Up 62% in 2026 Trey Thoelcke Tue, October 13, 2026 at 8:25 AM EDT 5 min read MSFT +1.14% BE -6.50% IGV -1.23% MU -3.88% SMH -2.05% Explore stocks on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
Cramer's software-over-chips case holds only in his chosen window; from January, semiconductors lead 62% to software's 5% gain.
The chip selloff traces to forced selling from a hedge fund that allegedly lost 67% in July, not weakening fundamentals.
Microsoft's $116 billion in 2026 capex and CFO confirmation that demand exceeds supply signals chip spending remains intact.
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On the October 12 episode of Mad Money, Jim Cramer said leadership in the artificial intelligence trade has moved out of chips and back into software: "Software is once again king while hardware has reverted to pawn." In his view, the software rally since the end of June marks a real change in which part of AI leads the market. Both groups traded lower before the open Tuesday morning.
Cramer used two funds to make his case. The VanEck Semiconductor ETF (NASDAQ:SMH) holds chip designers, manufacturers, and equipment makers. As of June 30, its largest positions were the industry's biggest chipmakers. The iShares Expanded Tech-Software Sector ETF (CBOE:IGV) holds software companies and charges an expense ratio of 0.38%. Many 401(k) investors own one or both of these holdings through tech or growth funds.
Cramer said that since the end of June, the software fund was up 23%. In the same remarks, Cramer put the chip fund down 10%. The actual figures from June 30 through October 13 were close: the software fund rose 22.4% and the chip fund fell 11.1%. If anything, he slightly understated how much chips have declined. Microsoft (NASDAQ:MSFT) rose 45.4% from June 30 to October 12, which also fits his software-first story.
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Over a longer stretch, the ranking flips. From December 31, 2025, through October 13, the chip fund gained 61.9% while the software fund gained 5.0%. From October 10, 2025, through October 13, 2026, the chip fund rose 79.8% and the software fund fell 1.0%.
The choice of start date drives the entire argument. Begin the count at a summer peak in chips, and software looks dominant. Begin it in January, and chips still lead by a wide margin. The summer move is best understood as a giveback within a rally that semiconductors still lead.
Cramer blames part of the rotation on the collapse of the Situational Awareness hedge fund. He said: "His biggest positions, Bloom Energy, SanDisk, Micron, had run too much and succumbed to profit taking." Cramer claimed the fund lost 67% of its money in July. That figure comes solely from his account and has not been independently confirmed.
When a fund holding a concentrated set of popular AI hardware stocks has to sell quickly, prices can fall whether or not the businesses have changed. From June 30 to October 12, Micron Technology (NASDAQ: MU) fell 14.3%, SanDisk (NASDAQ: SNDK) pulled back 34.6%, and Bloom Energy (NYSE:BE) fell 13.35%.
The operating numbers point the other way. Micron reported fiscal fourth-quarter revenue of $54.2 billion and guided to $61.5 billion, plus or minus $1.5 billion, for the current quarter. It says more than 75% of its calendar 2027 output is already committed. SanDisk guided to $10.30 billion to $10.80 billion in revenue, and Bloom raised its 2026 revenue outlook to $3.9 billion to $4.2 billion. Some of the pressure has a different source: a report that Chinese rival CXMT is developing a new chip weighed on Micron on Monday.
On the same afternoon, a guest strategist on Bloomberg Businessweek said the opposite: "Not complacency. What I see is too many people worried about what might happen. Data center demand might collapse, the borrowing that the hyperscalers have been doing... none of that looks like it's likely to happen." Microsoft, the biggest name in software, supports that view. The company spent $115.95 billion on capital expenditures in fiscal 2026, and CFO Amy Hood said on its July earnings call that "demand continues to exceed available supply."
That spending has to land somewhere, which is why we pulled together seven suppliers behind the AI expansion, from power to cooling to networking, in a free report you can grab here.
The summer decline looks like a forced-selling event layered on top of fundamentals that are still improving. Microsoft is the test to watch. It guided Azure growth to about 45% in constant currency for its fiscal first quarter and said fiscal 2027 capex will grow. If Microsoft misses that pace or cuts its spending plan, Cramer's call gains real support. If both hold, chip spending stays intact, making software's reign as "king" short-lived.
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