A clear pattern has emerged: when chip and networking stocks go up, software stocks often head in the other direction.
This trend continued early Wednesday. Palantir and Microsoft were among the S&P 500’s weaker performers as AI-related stocks rebounded. Palantir dropped 1.2% and Microsoft fell 1.1%. Salesforce, ServiceNow, and Workday also saw their shares decline.
These declines happened while chip and optical networking stocks rose after strong earnings reports boosted confidence in steady AI demand. Software and semiconductor stocks have been moving in opposite directions as investors consider how each fits into the AI boom. Chips are still crucial for running large language models, and the ongoing data-center construction has increased demand for optical cables and other networking gear.
Meanwhile, software companies are increasingly worried that AI could disrupt their businesses. Fast-improving AI coding tools may make some current software products less important in the future.
However, the relationship goes both ways. Over the past three months, Palantir and Microsoft have each seen strong gains, sometimes helped by worries that chip stocks were overpriced.
