Sector exposure aggregates positions that share an economic driver. Four semiconductor names are one bet on the semiconductor cycle; three regional banks are one bet on the yield curve and deposit flows.
Measure it in risk units, not dollars. If your rule is one unit per trade and you hold five energy names, you are carrying five units on a single oil-price factor - and sector correlation typically runs 0.6-0.8, rising toward 1 during selloffs, so the diversification you think you have mostly disappears when you need it.
A workable limit is a hard cap of three to four units per sector and a review whenever a new idea shares a driver with an existing one. Most concentration happens accidentally, through a screen that keeps returning the same industry.
Related: concentration-risk, sector-rotation, portfolio-heat