1 / 6

Delta-One Flows & Positioning — Semis Sold As AI Demand Stays Selective

Last week’s flow picture shows a market that is still willing to own risk, but with much sharper discrimination beneath the surface. Broad equity inflows remained close to average, large-cap Tech demand was solid, and global equity CTAs likely stayed long. Yet semiconductor ETFs continued to see heavy redemptions, Discretionary and Financials suffered outflows, and investors rotated into long-dated Treasuries, precious metals and Brent exposure.

Equity ETFs took in $25.6bn last week, roughly in line with average at -0.1z. Fixed income inflows were stronger at $13.1bn, or 0.4z, while commodity funds added $1.8bn, or 0.5z. Currency and multi-asset ETFs saw modest outflows of $0.2bn. The broad allocation message is not outright defensive, but it does suggest investors are becoming more selective about where they want cyclical and duration exposure.

Regionally, US equity ETFs attracted $17.7bn of inflows, while international developed markets added $6.6bn. Europe, India and Japan were all net positive, with Europe at 0.8z, India at 0.7z and Japan at 0.5z. EM risk-taking was more selective. Brazil saw heavy outflows at -2.8z, while Mexico also recorded significant redemptions at -1.5z. That split fits the broader macro backdrop: investors are willing to add exposure where earnings, policy or structural themes look supportive, but are less willing to hold broad EM beta indiscriminately.

The most striking equity-sector signal remains the divergence inside Tech. Large-cap Tech demand stayed strong, with QQQ drawing around $3bn of inflows and NDX futures seeing roughly $7.5bn of net buying. But Tech ETFs overall still saw $3.4bn of outflows, or -1.4z, driven mainly by semiconductor selling. SOXL, SMH and SOXX together saw $3.9bn of outflows, with around half of the total levered ETF outflow coming from SOXL alone.

That is an important positioning message. Investors are not abandoning Tech or AI exposure wholesale. Instead, they are reducing the most crowded, volatile or levered semiconductor expressions while maintaining demand for broader large-cap Tech. In practice, the AI trade is becoming more selective: capital is still flowing toward platforms and index-level growth exposure, but semiconductor beta is being trimmed after a strong run and amid concerns about valuation, concentration and cyclicality.

Discretionary and Financials also recorded outflows greater than 1z. The Discretionary weakness likely reflects concern that consumers have less room to accelerate spending from already elevated levels, even if the recent retail sales report did not point to a decisive downturn. Financials outflows fit with a more complicated curve backdrop: front-end Fed risk has eased, but long-end yields remain volatile and credit conditions are not obviously improving.

Style flows showed strong demand for multi-factor ETFs at 1.5z, while Low Vol and Single Stock products saw notable outflows at -1.3z and -1.1z respectively. This suggests investors are favouring diversified factor exposure over narrow single-name risk or purely defensive equity structures. Levered ETFs saw $0.9bn of outflows, with semiconductor leverage accounting for a large share. Again, the signal is not de-risking across the board, but less appetite for crowded high-beta expressions.

Fixed income flows were supportive, particularly at the long end. Long-term government bond ETFs saw strong inflows at 1.8z, while inflation-linked funds added 1.2z and aggregate or multi-sector funds attracted 0.7z. This is notable given the ongoing pressure on long-end yields. Investors appear willing to add duration as yields cheapen, but the parallel inflow into inflation-linked products shows they are not ignoring the risk that energy and fiscal dynamics keep inflation uncertainty elevated.

Commodity ETFs also drew inflows, led by precious metals. Gold funds helped drive $1.4bn of inflows into precious metals, supported by lower Fed hike expectations, softer dollar momentum and a still-uneasy geopolitical backdrop. Fiat ETFs saw strong outflows at -2.1z, with redemptions from UUP and USDU as the declining dollar reduced demand for long-dollar ETF exposure.

Futures flows showed large net buying in nickel and aluminium, alongside large net selling in Hang Seng, UST Ultra 10-year and Bitcoin futures. The industrial metals buying points to continued interest in structural demand themes, including electrification, infrastructure and AI-related power demand. The Hang Seng selling is consistent with weak China activity data and persistent concern around the property and consumer backdrop. Selling in longer-duration UST futures contrasts with ETF inflows into long-term government bonds, suggesting a split between cash ETF buyers adding yield and futures investors reducing or hedging duration risk.

CTA positioning likely remains broadly long global equities. CTAs bought EM and China equities week-on-week, remain short global fixed income outside China, and are still long copper and agricultural commodities. They also bought global FX against the dollar, consistent with the recent weakening in the dollar as markets priced down September Fed hike risk. That CTA backdrop can keep momentum supportive for equities and non-dollar FX, but it also leaves markets vulnerable if yields or the dollar reverse sharply.

CFTC data showed several important positioning shifts. Asset Managers sold Treasuries and cut Nasdaq 100 longs further, leaving NDX positioning historically low at -1.6z. That is a notable contrast with strong QQQ and NDX futures buying in the weekly flow data, suggesting the investor base is divided. Some allocators are adding broad Tech exposure tactically, while Asset Managers remain cautious or underweight NDX relative to history.

Leveraged Funds increased shorts in NDX and Russell 2000 futures, but cut shorts in S&P 500, EM and EAFE. That points to a more nuanced hedge-fund stance: scepticism remains around high-duration growth and small caps, but broader equity shorts have been reduced. Managed Money added significantly to Brent longs at 1.3z and sold agricultural commodities. The Brent buying matters because it aligns positioning with the recent rise in oil and geopolitical risk premium. If Middle East tensions escalate further, that long positioning may extend the move; if diplomacy improves, it also creates vulnerability to a sharp washout.

Flows show risk appetite is intact, but increasingly selective. Investors are buying broad equities, large-cap Tech, long-duration bond ETFs, gold and Brent, while selling semiconductors, Discretionary, Financials, Brazil, Latam and long-dollar ETFs. The AI trade is not dead, but semiconductor exposure is being trimmed aggressively. Duration is attracting cash buyers even as futures positioning remains pressured. And oil positioning is becoming more crowded just as Brent’s macro importance rises. This is a market still taking risk, but with much less tolerance for crowded or fragile expressions.