Investor interest in U.S. software ETFs is picking up again after a sharp surge of money flowed into the iShares Expanded Tech-Software ETF (BATS:IGV), highlighting a possible shift in the artificial-intelligence investment narrative. Market commentary platform Kobeissi Letter recently flagged the data in a post on X, showing what fund flows and trading activity were already saying.
It pulled in approximately $1.5 billion in inflows over two sessions, one of its largest short-term inflow bursts on record. Trading volumes jumped as well, with about 86 million shares traded across three days, while options activity indicated increasingly bullish positioning.
Software ETFs Back In Focus
IGV continues to be one of the more closely watched pure-play software ETFs, with exposure to major enterprise and cloud software firms expected to benefit from AI adoption. But it’s not alone.
Overlapping exposures are also available via the First Trust Dow Jones Internet Index Fund (NYSE:FDN), with its high content of internet-platform and cloud software names, and the Technology Select Sector SPDR Fund (NYSE:XLK), which contains large software players alongside broader tech heavyweights. FDN gained 1% and XLK was up more than 1.5% on Monday at the time of publish,
More growth-tilted offerings, such as the ARK Next Generation Internet ETF (BATS:ARKW), capture AI-linked software innovation themes, too, but with higher volatility. The fund was up 2.2% on Monday at last check.
The renewed interest suggests investors may be broadening their AI bets beyond semiconductors and hardware providers, which led earlier phases of the rally.
AI Monetisation Narrative Evolving
The shift in emphasis toward software is consistent with the general notion that spending on infrastructure, as a rule, leads to application-level revenue growth. In fact, as businesses begin to incorporate AI into their workflow, it could lead to an increased need for enterprise software, cybersecurity solutions, analytics, as well as cloud technologies.
ETFs offer a way to get a broad exposure to this theme without having to choose the best individual investments. This can be a difficult task, as investing in the technology space is a constantly changing and challenging process.
However, at times, high inflows with high option volumes may indicate a crowd position. But these apparent trends are often beneficial for the near-term stock price momentum.
Software valuations remain sensitive to borrowing costs and corporate IT budgets. AI adoption is advancing, but the pace at which it translates into sustained revenue growth varies widely across companies.
What It Means For Investors
At present, as far as ETF flows are concerned, the sentiment is improving for software stocks. IGV is a leading indicator for the segment. Earnings and macro stability would be key determinants of whether this is a form of long-term rotation into AI-driven software stocks.
IGV Price Action: iShares Expanded Tech-Software Sector ETF shares were up 3.49% at $85.34 at the time of publication on Monday, according to Benzinga Pro data.
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