Software stocks and ETFs: next big AI opportunity? – November 26, 2024

Artificial intelligence (AI) has been the biggest investment theme in recent years as it is rapidly transforming numerous industries. Investors are eager to pick the winners of the ongoing AI gold rush.

Semiconductor stocks were among the most obvious beneficiaries. Nvidia shares (NVDA short offerNVDA – Free Report), the developer of the most sophisticated AI GPUs, is up over 700% in the last two years. Now many investors are looking for the next big opportunities in other areas.

The software sector appears to be benefiting from an explosion of AI use cases driven by the widespread adoption of generative AI technology.

“The AI ​​revolution is accelerating, and now it is the software sector that will benefit from the use case phase of AI, which will peak in 2025,” said Wedbush analyst Dan Ives.

While many software stocks have risen sharply in recent weeks, the rally in semiconductor stocks has stalled. In addition to stretched valuations, semiconductor stocks face potential headwinds from tariffs and trade tensions under the new administration.

Palantir Technologies shares (PLTR Quick QuotePLTR – Free Report) jumped to a record high after the company reported better-than-expected results and raised its outlook, citing strong U.S. demand for its AI software.

Snowflake shares (SNOW short quoteSNOW – Free Report) surged over 32% on its best trading day ever after the data analytics software maker reported stellar results.

To learn more about the iShares Expanded Tech-Software Sector ETF (IGV quick offerIHR – Free report) and the SPDR S&P Software & Services ETF (XSW Quick QuoteXSW – Free report), please watch the short video above.

Adobe (ADBE Quick QuoteADBE – Free report) , Microsoft (MSFT Quick QuoteMSFT – Free Report), Oracle (ORCL short offerORCL – Free Report), AppLovin (APP quick quoteAPP – Free report) and MicroStrategy (MSTR Quick QuoteMSTR – Free Report) are among the top holdings of these ETFs.