Software Stocks Wobble as AI Reshapes Investor Priorities

Wall Street's longstanding love affair with software stocks is showing cracks. Salesforce, Adobe, and ServiceNow—each down at least 16% this year—have collectively shed $160 billion in market value as artificial intelligence rewrites the rules of tech investing. Two consecutive months of outflows from software funds through June signal growing sector skepticism.

"Tech obsolescence can come out of nowhere," warns Brave Eagle Wealth Management's Robert Ruggirello. The market is punishing companies perceived as defending legacy businesses while rewarding those aggressively deploying AI. Microsoft, Oracle, and Palantir—all up this year—demonstrate how AI adoption separates winners from losers.

Meta Platforms' resurgent revenue growth illustrates AI's transformative power, with improved ad targeting driving performance. Palantir expects 45% sales growth fueled by AI products, while cybersecurity firms like CrowdStrike benefit from AI-resistant business models. The shakeout reveals a new market calculus: adapt or atrophy.