AI Skepticism Fades as Tech ETFs Attract $22 Billion in a Single Quarter
nashnova research
The Nasdaq 100 closed at a record high, with tech ETFs drawing $22 billion in net inflows this quarter — nearly five times the $4.6 billion that went into everything else. This means → money is betting overwhelmingly on the AI trade, but Q3 earnings season will be the make-or-break moment.
Where is the money going?
Bloomberg Intelligence data: U.S. tech ETFs pulled in roughly $22 billion in net inflows this quarter; the rest of the market got about $4.6 billion. In plain terms = for every $5 entering the market, more than $4 went straight into tech.
The Nasdaq 100 rallied more than 10% from its intra-year low and closed Tuesday at a record high.
Bank of America, citing EPFR Global: U.S. equity funds attracted nearly $64 billion in the week ending September 16 — the highest in three months — while cash saw its largest outflow in nine weeks.
What are hedge funds doing?
CFTC data: hedge-fund net long positions in Nasdaq 100 futures have climbed to their highest since last December. This means → it is not just retail chasing the rally; institutional money is adding to tech exposure too.
Goldman Sachs prime-brokerage data: net U.S. equity buying last week hit a five-week high, led by software stocks.
Bloomberg Intelligence analyst Psarofagis sees room to run: tech inflows are "nowhere near extreme levels and do not yet constitute a contrarian signal."
What is holding up the bull case?
The core logic is corporate earnings. Argent Capital portfolio manager Ellerbroek stated plainly: "Given that corporate earnings are very strong, investors remain optimistic about AI."
His firm is overweight cybersecurity, software, and chips, and underweight consumer staples and real estate. This reflects an active rotation away from defensive sectors and into the AI supply chain.
But Ellerbroek added a caveat: "To sustain this rally, we need to keep seeing upward revisions to big-tech earnings expectations." In plain terms = good enough isn't enough — the market demands "getting better."
How critical is Q3 earnings season?
The market expects IT-sector Q3 profits to grow 64% year-over-year, far above the S&P 500's overall expected growth of 24%. This means → tech valuations already embed extremely high earnings expectations, leaving very little margin for error.
With less than a month until reporting begins, the gap itself is a two-way risk — a beat accelerates the rally; a miss could trigger a sharp reversal.
What warning signals are flashing?
Bank of America strategists Woodard and Hartnett warned that investor positioning looks stretched relative to the profit-growth outlook.
Market breadth keeps narrowing — 6% of S&P 500 constituents hit 52-week lows this month, a level last seen in October of last year. In plain terms = the index is making new highs, but a large share of individual stocks are making new lows — the rally is extremely concentrated.
Strategas chief ETF strategist Sohn was blunt: "Most areas outside tech are simply not worth owning."
What three risks hang over the bulls?
Middle East tensions, persistent inflation, and the Fed's policy path form a triple overhang of uncertainty.
Sohn suggested that if oil stays elevated, energy may be one of the few sectors that could attract fresh inflows. This reflects an emerging extreme within the market: outside tech, there is almost nowhere else to go.
The tech giants spending hundreds of billions on AI infrastructure must deliver on the market's sky-high expectations in the coming earnings season — that is the ultimate test of this rally's staying power.
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