There’s been a sea change among tech investors during the past month: Software stocks are hot, while semiconductor makers are not.
Wall Street is rotating out of the chip sector, put off by stretched valuations and trade war-related risks under Donald Trump. Already a vocal critic of the Chips Act, the president-elect vowed on Monday to impose additional tariffs on China, Canada and Mexico. Software, in contrast, has been on an upswing. Investors are positive on the group given its lower exposure to tariff risks, and as the tailwind from artificial intelligence looks set to shift from infrastructure to services.
"Software got left behind, but looks to be the next winner from AI, while it could also benefit if the new administration is more lenient on regulation and M&A,” said Bill Stone, chief investment officer at Glenview Trust. On the flip side, "there’s so much good news in chips, especially AI chips, that the valuation has gotten steep at a time when there’s more uncertainty.”
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