Investors Rotate From Chip Stocks Into Cybersecurity and Software Names
CrowdStrike and Palo Alto Networks jumped over 10% this week while Lam Research fell 13%. Barron's says the AI trade is shifting toward software and cybersecurity.
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what happened
According to Barron's, shares of large software-as-a-service companies, including cybersecurity firms CrowdStrike and Palo Alto Networks, were among the top S&P 500 performers this week, each rising more than 10%. ServiceNow and Workday also gained over 10%. Chip stocks, by contrast, sold off: Lam Research dropped 13% after warning of supply constraints, while KLA, Cerebras Systems and Credo Technology each fell more than 10%.
The author notes that investors are currently gravitating toward companies expected to benefit from AI-driven demand, including cybersecurity amid data breach worries. Sandisk shares are up more than 420% this year, but have slid over 30% in the past month. Microsoft, Amazon, Alphabet, ServiceNow, Fortinet, KLA, Seagate, Intel and Sandisk are all due to report earnings next week.
why it matters
The rotation from hardware into software makes the AI trade harder to read. For chip and storage stocks, the capital spending reports from big cloud providers matter most, since they signal whether demand for chips and memory holds up.
market impact
Chips and memory: capital outflows pressure the sector; software and cybersecurity names draw inflows
instruments
sources
- The AI Trade Is Shifting From Chip Stocks to Cybersecurity — Barrons.com, 24 October 2026 at 15:44 UTC
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