US software stocks attempt a rebound as investors reassess AI risks

• Software stocks headed for their fourth consecutive session of gains while chipmakers cooled off after reaching record highs earlier this month
• Analysts are becoming more selective, with BofA rating ServiceNow as 'buy' due to its entrenchment in enterprise workflows while downgrading Salesforce to 'underperform' citing structural business model threats
• The S&P 500 Software & Services Index remains down 13.7% for the year despite the recent rally, indicating significant valuation reset

Summary: US Software Stocks Rebound Amid AI Risk Reassessment

U.S. software stocks rallied for a fourth consecutive session on Tuesday, May 19, 2026, following a prolonged selloff driven by concerns over AI disruption. The sector's recovery occurred as semiconductor stocks cooled after the Philadelphia SE Semiconductor Index hit record highs earlier in the month.

Key Movers:

Enterprise software leaders Workday, ServiceNow, and Salesforce gained 3.7% to 4.3%. Cybersecurity firms including CrowdStrike, Okta, SailPoint, and Zscaler rose 1.2% to 2.5%.

Market Context:

The S&P 500 software and IT services index remains down 13.7% year-to-date, reflecting significant valuation compression. The rebound suggests investors are becoming more discriminating, separating companies vulnerable to AI disruption from those positioned to benefit through productivity gains and new product development.

Analyst Divergence:

BofA Global Research exemplified this differentiation on Monday, issuing a "buy" rating for ServiceNow while downgrading Salesforce to "underperform." Analysts cited ServiceNow's entrenched position in enterprise workflows as defensible, while warning that Salesforce faces "a structural shift that permanently impairs" its business model.

Outlook:

Despite the four-day rally, skepticism persists. Investors will likely require concrete evidence that software companies can protect profit margins and defend their business models against AI competition before committing to a sustained recovery.

The sector rotation from semiconductors to software may indicate broader market reassessment of AI winners and losers, though the rally needs further validation to establish a definitive trend reversal.