\n Some software companies have emerged as potential AI losers, while hardware companies (think semiconductor chipmakers) continue to be AI winners. Popular exchange-traded funds highlight the divergence: The iShares expanded tech-software ETF is down 20% this year, while the VanEck semiconductor ETF is up 13%.\n <\/p>\n
\n \u201cThe rising tide surrounding AI was lifting a lot of boats,\u201d Steve Sosnick, chief strategist at Interactive Brokers, previously told CNN<\/a>. \u201cNow it\u2019s forcing Wall Street to be much more selective and really decide who are the winners and losers. And that\u2019s going to require a lot more detailed analysis, rather than just sort of riding the momentum train.\u201d\n <\/p>\n \n A sell-off swept through software stocks last week after Anthropic \u2014 one of the world\u2019s biggest AI startups \u2014 released new plug-ins for its Claude chatbot. The plug-ins improved the chatbot\u2019s ability to do work-oriented tasks and stoked concerns that such AI tools could reduce businesses\u2019 need for their existing software subscriptions.\n <\/p>\n \n Investors are split on whether the sell-off was overdone. But software companies will need to evolve to co-exist with improvements in AI, said Angelo Zino, tech analyst at CFRA Research.\n <\/p>\n \n Software companies that can leverage their own proprietary data and develop their own AI offerings could compete with chatbots like Claude, he said.\n <\/p>\n \n \u201cYou\u2019ve got to be a lot more selective,\u201d Zino said. \u201cThe (companies) that do have access to customer data, and then can actually build actual (AI) agents upon that, those are going to be the ones that are going to be able to successfully evolve.\u201d\n <\/p>\n \n Dan Ives, a tech bull and global head of technology research at Wedbush Securities, called the software sell-off \u201coverblown\u201d in a note on Monday.\n <\/p>\n \n Ives said many customers have reservations about data privacy and protection, which could be a hurdle for general AI chatbots becoming go-to services for businesses.\n <\/p>\n \n While there are doubts about the software industry, Wall Street has resounding confidence that hardware companies are AI winners.\n <\/p>\n \n Semiconductor chips are vital for the AI boom. Chipmakers like Nvidia (NVDA<\/a>) have benefited from plans for enormous spending on data centers, regardless of whether investors approve of Big Tech\u2019s aspirations.\n <\/p>\n \n Memory chipmakers have also seen extraordinary surges due to expectations for the AI buildout to boost demand for data storage. Shares of Sandisk (SNDK<\/a>) are up a whopping 1,500% across the past year since it spun off from Western Digital, a data storage company.\n <\/p>\n \n Choosing winners and losers is not easy, and it might not be apparent which companies are poised to outperform. The \u201cMagnificent Seven\u201d group of technology stocks that powered the market higher across the past few years are diverging.\n <\/p>\n \n Big Tech \u201chyperscalers\u201d like Microsoft (MSFT<\/a>), Amazon (AMZN<\/a>), Meta (META<\/a>) and Alphabet (GOOG<\/a>), or companies building out infrastructure for the AI boom, are facing heightened scrutiny about their spending plans.\n <\/p>\n \n \u201cI think there\u2019s more risk now tied to some of these data center companies, these hyperscalers, because of the greater spending that they\u2019re taking on,\u201d Zino said.\n <\/p>\n \n To be sure, some investors are betting that the enormous build out will eventually translate into revenue and profits.\n <\/p>\n \n Alphabet and Meta shares are each up 3% this year. Amazon shares are down 10%, and Microsoft shares are down 14%.\n <\/p>\n \n \u201cI would argue we are still in the early innings of a long-tailed investment cycle, but we have moved past the \u2018beta\u2019 or \u2018get-me-in\u2019 phase where names are rewarded simply for announcing they are spending on AI-related capex,\u201d Kevin McCullough, portfolio consultant at asset management company Natixis Investment Managers Solutions, said in an email. \u201cThe next phase of this cycle, where the market tries to pick winners and losers, is likely here to stay.\u201d\n <\/p>\n \n Some investors are looking for winners in the AI boom by finding companies that might benefit from the side effects.\n <\/p>\n![\"Nvidia](\"https:\/\/www.newsbeep.com\/us\/wp-content\/uploads\/2026\/02\/gettyimages-2254371697.jpg\")
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