US Software Stocks Soar to 2026 Highs as AI Fears Fade

U.S. software stocks have surged to new 2026 highs, driven by rising earnings expectations and fading concerns over AI-led disruption. The S&P 500 software and services index climbed 1.3% on Tuesday, marking its highest level since November 2025. The sector also recorded its biggest quarterly gain since the second quarter of 2020, from July through September.

Strong earnings from companies like Salesforce, ServiceNow, and Accenture, along with strategic partnerships with AI labs, have bolstered the sector. Cybersecurity stocks, including CrowdStrike, Fortinet, and Palo Alto Networks, have seen significant gains as businesses increase spending on cybersecurity in the AI era.

Analysts now believe that fears over AI disrupting the software industry were overstated. Adam Turnquist, chief cross-asset strategist at LPL Financial, noted that AI has acted more as an enabler than a disruptor for software companies. The sector’s expected annual earnings growth rate for 2026 has risen to 20.6%, up from 13.8% at the end of March.

Concerns about the so-called “SaaSpocalypse”, the idea that AI could allow companies to build applications in-house more cheaply, have largely dissipated. Rebecca Wettemann, CEO of Valoir, stated that the predicted disruption did not materialize as quickly as some on Wall Street had anticipated. However, risks remain, with Brian Mulberry of Zacks Investment Management warning that the real test for software stocks may come in the second half of 2027, when additional data center capacity could intensify competition.