Investors in the U.S. stock market are shifting sentiment as artificial intelligence expands across mainstream sectors, driving interest toward AI plays and away from traditional software firms. According to this report, software companies within the S&P 500 have fallen sharply while the broader index rose, as investors weigh AI’s potential to replace existing software models.
Jefferies analyst Charles Brennan warned about the mood in the sector earlier in January, writing “Software sentiment has rarely been lower, with AI casting a shadow of uncertainty for the sector.” Investors worry that major SaaS offerings could be developed or replicated by AI, reducing demand for incumbent software products.
Macquarie analyst Steve Koenig noted industry investment in AI but flagged slow uptake, saying “The SaaS companies are wholeheartedly embracing agentic AI and putting a lot of investment dollars into this, but adoption is going really slowly.” That mix — heavy investment but gradual adoption — adds uncertainty for software earnings.
AI-related stocks dominated equity performance in 2025, per a report, led by data storage and analytics names. Top performers included Sandisk (+559%), Western Digital (+284%), and Seagate (+225%), while Palantir rose about +135% last year.
