Headline: AI Rally Reorders Tech Winners — Software Stocks Slide as Data-Storage and AI Plays Soar The US market is undergoing a clear rotation: artificial intelligence is sucking up investor attention — and capital — while traditional software names lose shine. As AI technologies seep into mainstream products and services, many investors are questioning the long-term upside of legacy software companies and redirecting bets toward AI-driven plays. Pressure on software: software stocks within the S&P 500 are down roughly 18% even as the broader index sits about 9% higher. Jefferies analyst Charles Brennan summed up the mood bluntly in January: “Software sentiment has rarely been lower, with AI casting a shadow of uncertainty for the sector.” The concern centers on whether AI can replicate or replace core SaaS functions, eroding the moat that once justified premium valuations. Slow adoption, big investment: analysts note a paradox — SaaS firms are pouring resources into “agentic” AI, but customer adoption is lagging. “The SaaS companies are wholeheartedly embracing agentic AI and putting a lot of investment dollars into this, but adoption is going really slowly,” Macquarie’s Steve Koenig told investors. Winners this cycle: AI-related equities dominated returns in 2025, led notably by data-storage names that benefited from massive AI-driven spending. According to the Kobeissi Letter, three of the S&P 500’s top four performers last year were data-storage companies: SanDisk (SNDK) surged about +559%, Western Digital (WDC) climbed +284%, and Seagate (STX) jumped +225%. Palantir (PLTR) was also a standout, producing roughly +135% and marking its third straight year of triple-digit gains. What this means for investors — including crypto participants: capital is rotating toward companies that feed AI’s infrastructure needs (compute, storage, data services) while pressuring legacy software valuations. For investors tracking both traditional tech and crypto, the shift is worth watching: AI demand could influence infrastructure spending and tokenized projects tied to compute, data, and storage markets, while traditional SaaS business models face an earnings and growth re-rating if AI substitutes core functionality. Bottom line: the AI boom is reshaping sector leadership. Some software firms may adapt and capture new AI opportunities, but many face an uphill battle to justify previous valuations as investors increasingly favor pure-play AI infrastructure and data-applicable names. Read more AI-generated news on: undefined/news

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