US software stocks scale fresh 2026 highs as AI disruption worries fade

US software stocks are reaching new highs in 2026, as concerns over AI disrupting the industry appear to be unfounded, according to analysts. The S&P 500 software and services index rose 1.3 percent on Tuesday, reaching its highest level since November 2025, after posting its largest quarterly gain in the July-September quarter since 2020. Strong earnings from companies like Salesforce, ServiceNow, and Accenture, along with partnerships with AI labs, contributed to the sector's recovery.

Cybersecurity stocks have also performed well, with shares of Crowdstrike, Fortinet, and Palo Alto Networks gaining over 100 percent this year as companies invest heavily in cybersecurity due to AI. Adam Turnquist, a strategist at LPL Financial, noted that AI has become more of an enabler for software companies rather than a disruptor.

The software index has gained 5 percent this year, outpacing the Philadelphia Semiconductor index, which surged 87.5 percent in 2026 but is still below its highs. The expected annual earnings growth rate for the software sector in 2026 has climbed to 20.6 percent, up from 13.8 percent at the end of March, according to LSEG data.

The sector's annual earnings growth rate for 2026 has risen to 20.6 percent, up from 13.8 percent at the end of March.