Despite the recent surge in software stocks, the article suggests there is still room for the trend to continue. The future of the rotation, however, will depend on the Trump administration's policies. While chip stocks have been the primary beneficiaries of the AI boom so far, software and services are expected to see a growth inflection in AI. The article also highlights the potential downside risk for chipmakers due to their high valuations.
Key takeaways:
- There's been a shift among tech investors, with software stocks becoming more popular than semiconductor stocks due to perceived risks associated with the latter under the Trump administration.
- Investors are positive on software stocks due to their lower exposure to tariff risks and the potential shift of artificial intelligence from infrastructure to services.
- Despite strong results, semiconductor companies like Nvidia Corp. have failed to excite investors, whereas software companies like Snowflake Inc. and Palantir Technologies Inc. have seen their shares soar.
- While semiconductor stocks remain popular for growth, the valuation of these stocks has become steep, creating potential for volatility, especially with the uncertainty around tariffs.