AI vs. Software: Who Wins?
What a week.
We got Dow 50,000, Alphabet (GOOGL) and Amazon (AMZN) cranking up their capex, a crypto collapse, and metals trading like meme stocks.
So let's talk about the 5 biggest things you need to know right now:
1. Software Got Nuked By AI
Software stocks were the talk of the town this week. In a bad, bad way.
Anthropic launched its Claude CoWork app and the world seemed to scream “AI is going to eat software.”
The way software was eating the world back in 2011, according to Marc Andreessen.
And people started creating doomsday scenarios for AI replacing software applications wholesale.
Traders developed a newfound obsession with the iShares Expanded Tech-Software Sector ETF (IGV), which had its highest-volume week ever.
Below the surface, it looks even worse.
The average individual stock in the IGV ETF is -44% below its 52-week high, according to KoyFin data.
Here are some examples:
- Microsoft Corporation (MSFT): -29%
- Salesforce Inc. (CRM): -44%
- WDAY Workday Inc. (WDAY): -44%
- ServiceNow Inc. (NOW): -53%
- Unity Software Inc. (U): -54%
- Oracle Corporation (ORCL): -60%
- Atlassian Corporation (TEAM): -71%
And at the bottom of the barrel is Tom Lee's Bitmine Immersion Technologies Inc. (BMNR) at 88% from its highs. (more on this below)
Here's another fun fact: just three of the 100+ stocks in IGV have made a 52-week high in 2026.
They are Zoom (ZM), A10 Networks (ATEN), and Electronic Arts (EA). And EA in only that category because it's being taken over.
Is the bottom in for software?
My personal guess is maybe.
IGV hit an RSI of 14.84 on Thursday. Hard to go lower than that:
I bought the Global X Cybersecurity ETF (BUG) Thursday because it's also oversold, and security may be more AI-proof long-term.
Ironically, software companies may benefit most from AI.
Because AI coding tools like Claude may help developers do more work faster.
So in this war… both AI and software may win!
2. Why Hardware Is Winning Now
We plotted a simple chart comparing IGV to the VanEck Semiconductor ETF (SMH) and the SPDR® Tech Sector ETF (XLK):
This lets us compare the software to the semiconductor sector (a good proxy for hardware) and tech overall.
So over the past year, SMH is up 60.8% while IGV fell 22.5%.
That's a differential of 83.3%!
You're asking why, right?
To me the answer is simple: shortages are sexy.
And short-term gyrations aside, the hottest semiconductor names like Micron (MU), Broadcom (AVGO), Lam Research (LRCX), and Nvidia (NVDA) have been supply constrained.
The “we can't make enough stuff to meet demand” message is catnip for traders.
That's why SanDisk (SNDK) is the #1 stock in the S&P 500 this year. (note: SNDK is not in the SMH ETF)
This excitement has pushed tremendous investment dollars to the semiconductor side.
Software's just not been as compelling from a story perspective.
3. Apple Took Over Mag 7, No AI Required
I've argued that Apple Is Playing the Smartest AI Game of All.
Unlike Alphabet (GOOGL), Amazon (AMZN), Meta (META), and Oracle (ORCL), Apple is not blasting hundreds of billions of dollars into new capex spending on AI hardware.
Apple's also not playing financial engineering games with the likes of OpenAI and CoreWeave (CRWV).
Apple is simply partnering with Google to enhance Siri with AI.
Simple, safe, efficient.
Especially since iPhone demand is rampant as it is.
And as of Friday morning, Apple was the #1 stock in the Mag 7 this year, by a hair:
4. Consumer Staples Went Parabolic
Of all the major index ETFs, the one showing the most power as of late is the Consumer Staples SPDR ETF (XLP).
XLP is up 13% YTD vs. a 1% gain for SPY.
Its RSI is at 82, which is a record high for XLP (or close to it – my data set isn't perfect). That's also the highest RSI of any major ETF.
Because stocks like Wal-Mart (WMT), Costco (COST), and earnings winner Pepsi (PEP) have been marching on up.
Now, there's an argument to be made that traders are looking for boring stocks after the wild action in AI, the metals, and cryptocurrencies.
But if we look back at the past 10 years, XLP has underperformed SPY by an enormous margin:
So there's an element of catch-up here.
Strength in the staples is one reason the Dow Jones Industrial Average just hit 50,000 today.
5. Knives Out for Tom Lee
Now, I'm not sure if the crypto market just bottomed.
But the hate for Market Strategist and Bitmine Immersion Technologies (BMNR) Chair Tom Lee has been deafening.
It feels worse than when everyone threw Ark Invest's Cathie Wood under the bus in 2022.
Tom's taken a lot of flack for his crazy bullish forecasts on Bitcoin and Ethereum.
But I now wonder if Bitmine bottomed at the point of maximum hate:
Are you buying?
I'm still afraid…