--- title: "Historic Divergence Between US Semiconductor Index and ISM Manufacturing: The Gap Will Eventually Close, Direction Is Key" type: "News" locale: "en" url: "https://longbridge.com/en/news/284276560.md" description: "Barclays stated that renewed enthusiasm for AI demand has driven significant gains in memory and semiconductor stocks, contributing the majority of recent rises in US and Asian indices, while European markets, with lower tech exposure and higher sensitivity to energy, have been left far behind. Bank of America strategists led by Michael Hartnett pointed out that the SOX Index has not only reached its most overbought level in over five years but has also completely decoupled from ISM Manufacturing—a divergence that historically tends to converge in some manner" datetime: "2026-04-27T22:35:49.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/284276560.md) - [en](https://longbridge.com/en/news/284276560.md) - [zh-HK](https://longbridge.com/zh-HK/news/284276560.md) --- # Historic Divergence Between US Semiconductor Index and ISM Manufacturing: The Gap Will Eventually Close, Direction Is Key Analysis indicates that high oil prices are already damaging the economy, leaving equity investors with little choice but to chase bubble sectors such as semiconductors. The conflict with Iran is far from resolved, with the Strait of Hormuz effectively still blocked, and negotiation prospects appear fraught with difficulties. This prolonged standoff is bad news for Europe, which relies on oil imports, continuously dragging down the performance of its market, which is heavily weighted toward energy-intensive cyclical stocks. In contrast, regions with higher weightings in technology stocks are outperforming, benefiting from a new wave of market enthusiasm for the AI theme. Barclays strategists led by Emmanuel Cau stated: > **Renewed enthusiasm for AI demand has driven significant gains in memory and semiconductor stocks, which have contributed the majority of the recent rise in US and Asian indices, while European markets, with lower tech exposure and higher sensitivity to energy, have been left far behind.** > > Capital expenditure by AI and hyperscale cloud providers continues to boost profitability across the supply chain, even though valuations and positioning have become less forgiving. This makes the risks surrounding the dense earnings calendar this week even more prominent—given the highly concentrated structural nature of returns in US and Asian markets, Microsoft, Meta, Alphabet, Amazon, and Apple are all set to release Q1 earnings and update capital expenditure plans, which is expected to provide further validation for this trading thesis. Although this rally, which appears severely stretched, has pushed the SOX Index into bubble territory, investors are chasing the theme. **The SOX Index has not only touched its most overbought level in over five years but has also completely decoupled from the ISM Manufacturing Index—a divergence that historically tends to converge in some manner.** **Bank of America strategists led by Michael Hartnett stated:** > The upward breakout in semiconductors implies that the US ISM will surge from its current level of 52.7 to above 60. > > Nevertheless, they still recommend that investors continue to buy chip stocks in the second quarter of this year. The team noted that due to geopolitical demands to monopolize chips, rare earths, minerals, and oil in the AI war, they believe the tech bubble has finally been reignited, with the market anticipating the largest wave of IPOs in human history. Furthermore, although consumer stocks remain sluggish, strategists indicated that Wall Street is still expecting a return of the nominal economic prosperity narrative. They highlighted that Trump might pivot to affordability issues to win the midterm elections, suggesting buying consumer cyclical stocks. Additionally, they recommended buying themes such as Chinese stocks and commodities. Meanwhile, oil prices continue to dominate market direction, particularly in Europe. The 120-day correlation coefficient between the Euro Stoxx 600 Index and Brent crude has currently reached its most negative level since data recording began in 1990, with a reading close to -55. The corresponding figure for the S&P 500 Index and WTI crude is -36, the lowest since 1994. The European economy is already feeling tangible pressure. The preliminary April S&P Global PMI released last week showed that the global economy is bearing a new round of price pressures for the second consecutive month. Private sector activity in the Eurozone has been further impaired, and Asia's resilience also appears precarious. In contrast, US business activity has rebounded, boosted by the strongest manufacturing growth in nearly four years—war-related supply disruptions have triggered a rush among companies to stockpile materials. Chris Iggo, Chief Investment Officer of AXA IM Core at BNP Paribas Asset Management and Chair of the Investment Institute, stated: > From the perspective of inflation expectations, market pricing still suggests a slight, moderate rise in inflation in the near term, followed by a gradual reflection of the diminishing marginal effect of energy price increases. However, it is unclear whether the market has fully priced in the potential impact on economic activity, supply chain disruptions, and margin pressures. 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