Software Takes the Baton as AI Remains Durable, but Commodity Hedges Bleed
The thematic ETF tape is still positive, but the character of the flows changed sharply over the last week. Across the 6/4 thematic universe, net flows were only +$0.8B over 1W, compared with +$18.9B over 1M and +$89.2B YTD. That is not a wholesale retreat from thematic investing, but it is a clear deceleration in the pace of allocation.
The strongest weekly flows moved into software, disruptive technology, ESG/growth, REITs, electrification, clean energy and space, while the biggest outflows hit natural resources, momentum, dividend/core income, robotics & AI, aerospace/defense, internet/metaverse and blockchain. The message is nuanced: investors are still buying the AI-adjacent growth complex, but they are becoming more selective about which part of the AI trade they want to own.
The morning headline backdrop supports that selectivity. AI infrastructure demand still looks durable, with TSMC pointing to persistent advanced-chip supply shortages, Apple reportedly using Google and Nvidia chips for a new Siri launch, Foxconn partnering with Intel on AI infrastructure, and memory shortages threatening supply chains. But the tape also showed fatigue around AI expectations, with Broadcom sliding on a disappointing AI chip forecast, CrowdStrike pressured by weaker annual recurring revenue growth, rising concern about AI data-center backlash, and more firms adopting lower-cost DeepSeek models.
Flow snapshot: 1W versus 1M and YTD
| Theme | 1W Flow | 1M Flow | YTD Flow | 1W Return | 1M Return | Read-through |
| Software | +$1.2B | +$3.0B | +$8.2B | +7.4% | +22.0% | Strongest current leadership |
| Disruptive Technology | +$616M | +$1.2B | +$2.3B | +2.3% | +14.8% | High-beta growth still attracting capital |
| ESG | +$540M | +$879M | +$6.6B | +0.3% | +4.6% | Durable, growth-heavy allocation support |
| REITs | +$527M | +$2.0B | +$1.7B | -2.3% | -1.5% | Contrarian/rates-lower positioning |
| Electrification | +$310M | +$1.5B | +$5.4B | +0.1% | -0.3% | Durable AI-power/grid theme |
| Clean Energy | +$260M | +$669M | +$580M | -0.4% | +10.1% | Improving but still volatile |
| Space Exploration | +$230M | +$529M | +$1.4B | -9.6% | +11.4% | Strong flow story, very volatile price action |
| Semiconductors | +$158M | +$1.3B | +$10.0B | +6.1% | +27.7% | Durable, but weekly flows less decisive |
| Infrastructure | +$117M | +$655M | +$3.3B | -0.4% | -2.3% | Long-term support intact |
| Legacy Energy | +$101M | +$131M | +$1.7B | +3.2% | -3.4% | Geopolitical hedge, not broad leadership |
| Robotics & AI | -$223M | +$1.2B | +$5.0B | +3.1% | +15.6% | Durable YTD, volatile near term |
| Momentum | -$868M | +$1.8B | +$6.2B | +1.1% | +6.5% | Performance holding, flows reversing |
| Natural Resources | -$1.4B | -$1.1B | -$6.5B | -0.7% | +1.0% | Weakest overall flow trend |
What changed this week
The market did not abandon growth. It rotated within growth.
The most important weekly shift was the move into software. Software funds took in +$1.2B over 1W, the largest thematic inflow in the dataset, and are now up to +$3.0B over 1M and +$8.2B YTD. That makes software one of the cleanest “durable plus accelerating” themes in the report. The category also delivered strong performance, with average returns of +7.4% over 1W and +22.0% over 1M.
Semiconductors remain a major long-term leader, with +$10.0B YTD and +$1.3B over 1M, but the weekly flow picture was less emphatic at only +$158M. That does not break the theme. The group still returned +6.1% over 1W and +27.7% over 1M. But it does show that investors are not blindly adding to every part of the chip trade after a huge run.
The AI complex is also showing more dispersion. Robotics & AI funds still have +$5.0B YTD and +$1.2B over 1M, but they saw -$223M over 1W despite positive returns. That is the clearest example of a theme that remains structurally durable but tactically volatile.
Durable themes
The most durable themes are the ones with positive flows across 1W, 1M and YTD. These are the areas where capital is not just chasing one week of performance; it has been building over multiple time frames.
| Durable Theme | 1W Flow | 1M Flow | YTD Flow | 1M Return | Why it matters |
| Semiconductors | +$158M | +$1.3B | +$10.0B | +27.7% | Core AI infrastructure exposure |
| Software | +$1.2B | +$3.0B | +$8.2B | +22.0% | Strongest current flow/performance combination |
| ESG | +$540M | +$879M | +$6.6B | +4.6% | Durable growth-oriented allocation bucket |
| Electrification | +$310M | +$1.5B | +$5.4B | -0.3% | Grid, power demand and AI infrastructure read-through |
| Infrastructure | +$117M | +$655M | +$3.3B | -2.3% | Long-term physical capex support |
| Disruptive Technology | +$616M | +$1.2B | +$2.3B | +14.8% | Risk appetite remains alive |
| Uranium / Nuclear | +$47M | +$485M | +$1.9B | +3.6% | Power demand and energy-security support |
| REITs | +$527M | +$2.0B | +$1.7B | -1.5% | Rates-lower / crude-lower positioning |
| Clean Energy | +$260M | +$669M | +$580M | +10.1% | Improving, but less established than electrification |
The cleanest durable leadership is in software, semiconductors, electrification and infrastructure. These themes all connect to the same larger investment narrative: AI is not just a model story; it is a compute, power, grid, data-center and physical-capex story.
The morning headlines reinforce that point. TSMC expects advanced-chip supply tightness to persist for years, memory shortages remain a supply-chain risk, Nvidia is pushing into local AI chips, Foxconn and Intel are partnering on AI infrastructure, and AI demand is spreading into power and battery infrastructure.
Volatile themes
The volatile themes are not necessarily broken. In several cases, they still have positive 1M and YTD flows, but the 1W flow reversal shows investors are taking profits or becoming more selective.
| Volatile Theme | 1W Flow | 1M Flow | YTD Flow | 1W Return | 1M Return | Signal |
| Momentum | -$868M | +$1.8B | +$6.2B | +1.1% | +6.5% | Profit-taking after strong run |
| Dividend / core income | -$337M | +$6.1B | +$41.6B | +0.1% | +2.4% | Long-term inflows intact, weekly rotation out |
| Robotics & AI | -$223M | +$1.2B | +$5.0B | +3.1% | +15.6% | Durable theme, choppy sponsorship |
| Blockchain | -$95M | +$23M | +$168M | -2.6% | +15.4% | Momentum rebound lacks durable flow confirmation |
| Internet & Metaverse | -$146M | +$235M | -$1.8B | +0.5% | +3.7% | Short-term bounce, weak longer-term ownership |
| Space Exploration | +$230M | +$529M | +$1.4B | -9.6% | +11.4% | Flows strong, price action unstable |
The most important volatile theme is Robotics & AI. The category is still a YTD winner, but the weekly outflow suggests investors are differentiating between AI beneficiaries. Software and select semiconductors are attracting capital, while broader AI baskets are more vulnerable to positioning resets.
The same is true for blockchain. The 1M return was strong at +15.4%, but the category saw -$95M over 1W and only +$23M over 1M. That looks more like a trading rebound than a durable allocation trend.
Space exploration is a different kind of volatility. Flows are strong, with +$230M over 1W, +$529M over 1M and +$1.4B YTD, but performance fell -9.6% over 1W. SpaceX-related headlines — including IPO plans, a planned semiconductor facility and investor-client outreach — are clearly keeping the theme in focus, but the ETF price action remains unstable.
Strongest overall trends
- Software is the new weekly leader
Software is the standout this week. It has the best 1W flow total, strong 1M and YTD sponsorship, and the strongest combination of flow acceleration and performance. The weekly software inflow was led by IGV, which took in nearly +$1.0B over 1W and has attracted roughly +$8.0B YTD.
This fits the headline backdrop. While chip demand remains strong, investors are also looking for AI monetization, productivity gains and enterprise adoption. Software is benefiting from that rotation, even as some individual AI-linked software names face scrutiny around spending and customer growth.
- Semiconductors remain the strongest long-term pure thematic trend
Semiconductors are still the most important YTD thematic growth winner outside the dividend/core bucket. The group has +$10.0B YTD, +$1.3B over 1M and positive 1W flows, while also producing exceptional performance.
The caveat is that weekly flows were mixed under the surface. SMH had a strong weekly inflow, while SOXX had a large weekly outflow. That suggests the semiconductor trade remains durable, but investors are rotating within the category rather than adding indiscriminately.
- Electrification and infrastructure remain the cleanest second-order AI plays
Electrification has +$5.4B YTD, +$1.5B over 1M and +$310M over 1W. Infrastructure has +$3.3B YTD, +$655M over 1M and +$117M over 1W. These are not the best-performing themes over the last week, but the flow durability is important.
The sector read-through is clear: AI demand is pulling capital toward grid capacity, electrical equipment, power infrastructure, energy storage, cooling, construction and industrial capex. The headlines around data-center power needs, memory shortages and AI infrastructure partnerships support that theme.
- REITs are quietly becoming a rate-cut / conflict-resolution trade
REITs took in +$527M over 1W and +$2.0B over 1M, even though average returns were negative over both time frames. That is a meaningful flow signal. Investors appear willing to add to rate-sensitive real estate before the price action improves.
The logic is likely tied to crude, inflation and yields. Morning headlines showed ongoing Iran-related uncertainty, but also signs that the market is contemplating a path toward de-escalation, including discussion of reopening the Strait of Hormuz after an MoU and signs of restraint around restarting the conflict. If conflict risk fades, crude could move lower, inflation pressure could ease and rates could become less punitive for REITs.
Weakest overall trends
- Natural resources are the weakest flow trend by a wide margin
Natural resources saw -$1.4B over 1W, -$1.1B over 1M and -$6.5B YTD. That is the clearest negative trend in the dataset. The outflows were concentrated in precious-metals vehicles, especially GLD and SLV.
This is notable because the news backdrop still includes energy disruption, fertilizer cost pressure, shipping risk and Middle East uncertainty. But investors are not using broad natural-resource ETFs as the preferred hedge. In fact, they appear to be reducing commodity hedges as the market prices some probability of conflict de-escalation.
- Finance / fintech remains structurally weak
Finance/fintech had -$15M over 1W, -$297M over 1M and -$1.2B YTD, with negative average returns over both 1W and 1M. Higher rates may help some banks, but the thematic fintech complex is not attracting capital.
Private-credit headlines also remain a caution point, with redemption limits and valuation/spread concerns keeping pressure on the broader financial innovation narrative.
- Low-volatility and defensive factors are not attracting safe-haven demand
Low-vol funds saw -$63M over 1W, -$365M over 1M and -$811M YTD. That is important because macro uncertainty remains high. Investors are not responding to higher rates, sticky inflation and geopolitical risk by crowding into low-volatility factor ETFs.
Instead, the money is still going toward growth, AI infrastructure and selective rate-sensitive recovery trades such as REITs.
- Biotech, climate/carbon, gaming and water remain lower-conviction
Biotech had -$89M over 1W and -$454M over 1M. Climate/carbon saw negative flows across all three periods. Gaming/esports and water also remain weak on a flow basis.
These themes are not necessarily uninvestable, but they lack sponsorship. Without sustained inflows, rallies in these groups look more tactical than durable.
Weekly flow leaders and laggards
| Biggest 1W Inflow Themes | 1W Flow | 1M Flow | YTD Flow | ||||
| Software | +$1.2B | +$3.0B | +$8.2B | ||||
| Disruptive Technology | +$616M | +$1.2B | +$2.3B | ||||
| ESG | +$540M | +$879M | +$6.6B | ||||
| REITs | +$527M | +$2.0B | +$1.7B | ||||
| Electrification | +$310M | +$1.5B | +$5.4B | ||||
| Clean Energy | +$260M | +$669M | +$580M | ||||
| Space Exploration | +$230M | +$529M | +$1.4B | ||||
| Semiconductors | +$158M | +$1.3B | +$10.0B | ||||
| Biggest 1W Outflow Themes | 1W Flow | 1M Flow | YTD Flow | ||||
| Natural Resources | -$1.4B | -$1.1B | -$6.5B | ||||
| Momentum | -$868M | +$1.8B | +$6.2B | ||||
| Dividend / core income | -$337M | +$6.1B | +$41.6B | ||||
| Robotics & AI | -$223M | +$1.2B | +$5.0B | ||||
| Aero / Defense | -$212M | -$666M | +$1.6B | ||||
| Internet & Metaverse | -$146M | +$235M | -$1.8B | ||||
| Blockchain | -$95M | +$23M | +$168M | ||||
| Biotechnology | -$89M | -$454M | -$27M | ||||
Bottom line
The strongest thematic trends are software, semiconductors, electrification, infrastructure, disruptive technology and selective AI infrastructure. These themes combine positive longer-term flows with continued support from AI demand, data-center buildout, chip shortages, power needs and enterprise adoption.
The most volatile trends are robotics & AI, blockchain, momentum, clean energy and space. These areas still have upside participation, but the flow tape shows a higher risk of profit-taking and positioning reversals.
The weakest trends are natural resources, finance/fintech, low volatility, biotech, climate/carbon, gaming and water. Natural resources are the clearest negative standout, with outflows across every major time frame and the largest YTD redemption total in the thematic universe.
Conclusion: investors are still going with the AI flows, but they are no longer buying the theme indiscriminately. The market is rewarding the parts of thematic growth with visible demand, capex linkage and monetization potential, while punishing commodity hedges, defensive factors and themes without sustained sponsorship.
Data note: Category flows are summed from ETFThemes.com’s curated database of 350+ large, liquid, US-domiciled thematic equity ETFs. All data sourced from FactSet Research Systems Inc.
Disclaimer:
This report is for informational and market commentary purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security or fund. ETF flow and performance data are historical and may not indicate future results
