US software stocks scale fresh 2026 highs as AI disruption worries fade
XLK•The S&P 500 software and services index rose 1.3% Tuesday to its highest level since November 2025. Expected 2026 annual earnings growth for the sector climbed to 20.6%, from 13.8% at the end of March.
1. Earnings expectations rise
Strong results from Salesforce, ServiceNow and Accenture, alongside partnerships with AI labs, helped support a sector recovery underway since late June. The software index is up 5% this year, while the Philadelphia Semiconductor index has surged 87.5% but is well off its highs.
2. AI risks remain
The software index fell more than 26% from late January to its April low amid concerns that companies could use AI to build applications in-house more cheaply. Analysts said those fears had moved ahead of the evidence, though one strategist said the second half of 2027 could test software stocks as more data center capacity might make AI coding a greater threat.
