AI Stock Rally in 2026: Semiconductors Soar While Software Stocks Slump

The AI stock rally of 2026 is reshaping the tech landscape, with semiconductor stocks surging while software companies face significant headwinds. Memory device makers and chipmaking equipment providers like Lam Research, Applied Materials, and KLA Corp. have seen their stocks climb by 20% to 25%, driven by the insatiable demand for AI infrastructure. However, software giants like Intuit, ServiceNow, and Salesforce are struggling, as investors worry that AI-native startups could disrupt their business models.

The AI revolution has fueled a multi-year rally in tech stocks, but the dynamics have shifted over time. As new bottlenecks emerge in the AI infrastructure buildout, investors are increasingly focusing on the companies that supply the critical hardware needed to power AI systems. Semiconductor firms, which produce the chips essential for AI processing, have become the darlings of the market, while software companies are viewed with growing skepticism.

The Rise of Semiconductor Stocks

Semiconductor stocks have been the standout performers in the AI rally, with companies like Lam Research (LRCX), Applied Materials (AMAT), and KLA Corp. (KLAC) leading the charge. These firms, which provide the tools and equipment needed to design and manufacture AI chips, have seen their stocks surge by 20% to 25% in recent weeks. The demand for AI-enabled hardware has created a shortage of critical components, driving up prices and boosting the profits of semiconductor manufacturers.

Intel (INTC), one of the best-performing stocks in the S&P 500 this year, has also benefited from the AI boom. Investors are betting that federal government investments and partnerships with AI leaders like Nvidia (NVDA) will help the storied chipmaker overcome years of struggles. However, Intel’s recent stock plunge, following a disappointing earnings outlook, underscores the challenges of executing a multi-year turnaround in a rapidly evolving market.

Software Stocks Left Behind

While semiconductor stocks thrive, software companies are facing a more challenging environment. Software giants like Intuit (INTU), ServiceNow (NOW), Adobe (ADBE), and Salesforce (CRM) are among the worst-performing stocks in the S&P 500 this year. Investors are concerned that AI-native startups, which are more agile and innovative, could take market share from established software providers. Additionally, AI disruption threatens the seat-based pricing model that has long been a cornerstone of software-as-a-service (SaaS) profitability.

Software executives have highlighted AI-driven efficiencies as a source of modest profit gains, but these improvements have done little to reassure investors. In contrast, semiconductor manufacturers like Micron have reported sold-out high-bandwidth memory chips due to AI demand, reinforcing the market’s preference for companies directly benefiting from AI hardware needs.

Digital marketing software company Applovin (APP) is an exception, with its stock soaring over 700% in 2024 and doubling in 2025 due to AI-powered revenue growth. However, allegations of shady practices and recent market pessimism have led to a 22% decline in the stock this year, highlighting the volatility of the software sector.

The AI stock rally of 2026 is a tale of two industries: semiconductor stocks are soaring on the back of AI demand, while software companies face disruption and uncertainty. As AI continues to reshape the tech landscape, investors will need to navigate these shifting dynamics to identify the next wave of winners and losers.