US Chip Darlings Struggle, Some Bet on Software as Next Big AI Play
US chip stocks were the biggest beneficiaries of last year's artificial intelligence investment craze, but they have stumbled so far this year, with investors moving their focus to software companies in search of the next best thing in the AI play. The shift is driven by tariff-driven volatility and a dimming demand outlook following the emergence of lower-cost AI models from China's DeepSeek, which has highlighted how competition will drive down profits for direct-to-consumer AI products. Several analysts see software's rise as a longer-term evolution as attention shifts from the components of AI infrastructure.
- As the focus on software companies grows, it may lead to a reevaluation of what constitutes "tech" in the investment landscape, forcing traditional tech stalwarts to adapt or risk being left behind.
- Will the software industry's shift towards more sustainable and less profit-driven business models impact its ability to drive innovation and growth in the long term?