U.S. software stocks experience a fourth consecutive session of gains on Tuesday, following a painful valuation reset in 2026, with gains hinted by an investor sentiment shift towards companies more likely to benefit from AI advancements.
Traders work on the floor at the New York Stock Exchange in New York City, U.S., May 15, 2026. REUTERS/Jeenah Moon May 19 - U.S. software stocksheadedtoward their fourth consecutive session of gains on Tuesday, attempting a comeback after being battered for much of the yearonfears of disruption from artificial intelligence.
The beleaguered sector's rebound coincided with a slide in chipmakers, which began to cool off following a blistering rally that took the Philadelphia SE Semiconductor Index to a record high earlier this month. The iShares Expanded Tech‑Software Sector ETF rose 1.1%, hitting its highest level since January. Workday, ServiceNow and Salesforce rose between 3.7% and 4.3%. The gains hint at a possible shift in investor sentiment as markets reassess software stocks following a painful valuation reset.
A sustained rebound would suggest that markets are becoming more selective, distinguishing between companies genuinely at risk of being disrupted by AI and those that could ultimately benefit through higher productivity, new products and stronger customer demand. The divergence was on display on Monday, with analysts at BofA Global Research giving ServiceNow a"buy" rating, while reinstating Salesforce with an"underperform.
" ServiceNow is"difficult to challenge" because it is"too entrenched" in large enterprise workflows, they said. Salesforce, however, faceswhat the analysts called"a structural shift that permanently impairs Salesforce's business model.
" Still, the rally may need to extend further to convince skeptics. Investors are likely to demand clearer evidence that software companies can defend their profit margins and business models from the competitive threat posed by AI. The iShares Expanded Tech‑Software Sector ETF has lost 12.2% so far this year as of Monday's close. The S&P 500 software and services index is also down 13.7%.for breaking news alerts and key updates!
Software Stocks Artificial Intelligence Price Correction Valuation Reset Reassessment Productivity New Products Customer Demand Reinstated Buy Outperform Compensation Challenging Entrenched Structured Shift Profitable Margins Business Models Competitive Threat AI Advancements Valuation Adjustment
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