US Software Stocks Reach 2026 Highs on AI Boom

US software stocks have reached new highs in 2026, driven by improving earnings expectations and easing concerns about AI disruption. The S&P 500 software and services index climbed 1.3% on Tuesday, hitting its highest level since November 2025. This marks the sector's strongest quarterly gain since the second quarter of 2020.

Strong financial results from companies like Salesforce, ServiceNow, and Accenture, along with strategic partnerships with AI developers, have fueled the sector’s recovery since late June. Cybersecurity firms such as CrowdStrike, Fortinet, and Palo Alto Networks have seen triple-digit gains this year as businesses increase security spending in the AI era.

Adam Turnquist, chief cross-asset strategist at LPL Financial, noted that AI has acted more as an enabler than a disruptor for many software companies. He suggested that software stocks may outperform semiconductors in the near term. The software index has gained 5% this year, while the Philadelphia Semiconductor Index surged 87.5% in 2026, though it has since pulled back from its peak.

The software sector’s projected earnings growth for 2026 has risen to 20.6% from 13.8% at the end of March, according to LSEG data. Earlier fears of a 'SaaSpocalypse', where AI could reduce demand for traditional software, have eased as vendors report stronger customer adoption. However, risks remain as AI continues to reshape business models, with potential challenges emerging in the second half of 2027.