AI trade is taking a detour into software

The AI party changed rooms

For most of 2026, the AI trade has had a pretty simple script: own the chipmakers, collect applause, repeat. On Friday, though, the market decided to add a plot twist. Semiconductors stumbled, software ripped, and suddenly the AI conversation looked a lot less like “who sells picks and shovels?” and a lot more like “who actually turns all this AI spend into recurring revenue?”

Software got the mic

The iShares Expanded Tech-Software Sector ETF, better known as IGV, and the State Street SPDR S&P Software & Services ETF, XSW, each climbed almost 4%, while the semiconductor ETF SMH dropped about 4%. That’s a huge swing for two corners of the same AI story, and it tells you investors are no longer treating software as just the awkward cousin at the data-center reunion.

A bunch of names joined the party too:

• Guidewire, BlackBerry, Intapp, ServiceNow, Asana, Workday, AppLovin, and Palantir all caught bids
• Several chip names like Microchip, Analog Devices, Monolithic Power, Teradyne, and ON Semiconductor got sold
• Broad tech funds like XLK and FDN were also part of the mix, because apparently everyone wants a piece of the AI buffet

What this means for your portfolio

This doesn’t automatically mean semis are done moonwalking. More likely, investors are doing that classic Wall Street thing where they take chips from one table and stack them on another after a monster run. In plain English: after months of stuffing chip exposure into every suitcase, people may be looking for the next leg of the AI trade.

That matters because software can potentially monetize AI in a different way — through subscriptions, enterprise adoption, and sticky workflows, not just hardware cycles and capex spikes. If that thesis sticks, the market may start rewarding companies that sell the “brains” of AI just as much as the boxes that power it.

Big picture: Friday looked less like the end of the AI trade and more like version 2.0 — hardware built the road, but software may be where investors finally start paying tolls.