By Kit Norton

It's a good time to be a chip stock investor. The same can't be said for software stock bulls, and it's all tied to how investors view the two industries in relation to the artificial intelligence boom.

Now, earnings season is widening the gap between the two sectors.

With artificial intelligence driving up demand for chip processors, semiconductor stocks have been rallying at historic levels. However, the AI thesis for software plays is less favorable, with the overwhelming sentiment being that AI will disrupt software, rendering some offerings obsolete.

This fear has led to a broad selloff in software stocks while the PHLX Semiconductor Index, a sector benchmark also referred to as the Philadelphia Semiconductor Index or SOX, just experienced its largest 25-day rally since the 2000 dot-com bubble.

The divide between software stock performance and surging chip stocks doesn't appear to be slowing down.

The VanEck Semiconductor ETF rose 4% on Friday while the iShares Expanded Tech-Software Sector ETF declined about 0.5%, as investors digested numerous earnings reports.

For comparison, the S&P 500 and the tech-heavy Nasdaq Composite rose 0.8% and 1.4%, respectively. The Dow Jones Industrial Average was flat.

Investors need only look at the reaction to earnings for software and chips to see why one sector is outperforming the other.

Software play HubSpot on Friday was on pace for its worst day on record despite beating first-quarter earnings estimates. Guidance was a weak spot for HubSpot, which sees revenue of $3.7 billion to $3.71 billion in 2026, up from prior calls for $3.69 billion to $3.7 billion. Wall Street was looking for $3.7 billion. The company also guided for second-quarter revenue between $897 million and $898 million, below analysts' projections of $899 million.

Elsewhere, SoundHound AI plummeted 10% after the maker of voice recognition technology posted a slightly wider-than-anticipated loss in its latest quarter following a massive acquisition spree. The company also reaffirmed 2026 revenue guidance with a midpoint that exceeded Wall Street's expectations.

Atlassian sank 6% on Friday and is down on the week. The workflow software company on April 30 beat both earnings and revenue expectations for its fiscal third quarter. Shares initially surged a week ago but have since given back those gains.

Applovin also declined 5% Friday after soaring Thursday. The artificial intelligence-based mobile advertising platform, reported late Wednesday better-than-expected f irst-quarter revenue and earnings.

In contrast, Nvidia jumped 2.3% to $216.38, nearing a record closing high. Nvidia has added to its rapidly expanding roster of partners by striking an artificial-intelligence infrastructure deal with AI cloud provider IREN. On Wednesday, Elon Musk's SpaceX and AI start-up Anthropic announced a partnership that will give Anthropic access to more than 300 megawatts of capacity across over 220,000 Nvidia chips at SpaceX's Colossus 1 data center in Tennessee.

Advanced Micro Devices surged 8.2% on Friday and is up 22% for the week after the chip maker reported solid first-quarter earnings Tuesday with data-center sales increasing 57%. AMD also provided strong second-quarter guidance, with sales and adjusted gross profit projections well above expectations.

Overall, in the VanEck Semiconductor ETF, the best-performing stocks Friday were Micron Technology, Qualcomm, Advanced Micro Devices, Intel, and KLA Corp., according to Dow Jones Market Data. Nvidia was also among the top stocks in the ETF.

In comparison, the top five-performing stocks in the iShares software ETF on Friday were Dropbox, Gen Digital, Bill Holdings, AvePoint, and Teradata. Meanwhile, the laggards on Friday were HubSpot, SoundHound AI, AppLovin, Appian, and Atlassian.

So far this year, the top performers in the software ETF are Hut 8 Corp, Terawulf, Riot Platforms, Aurora Innovation, and Adeia.

Meanwhile, Broadcom leads the VanEck Semiconductor ETF so far this year with a 66% advance. Teradyne, Applied Materials, Texas Instruments, and Cadence Design Systems fill out the top five performers year-to-date.

So far this week, the semiconductor ETF is up 10% while the iShares software ETF has gained 3.4%.

The further out the timeline is pushed, the wider the divide becomes.

Over the past 30 days, the VanEck semiconductor ETF has surged 32%, well outpacing the software ETF, which has advanced 13%, according to Dow Jones Market Data.

So far this year, the software ETF has declined 15% while the chips ETF has surged 56%. When looking at the past 12 months, the contrast is even starker with the semiconductor ETF advancing more than 150% while the software ETF has declined 11%.

The only thing that remains to be seen is who is right when it comes to AI, software, and chips.

Write to Kit Norton at kit.norton@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 08, 2026 14:05 ET (18:05 GMT)

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