Key Insights
- Leading providers of AI semiconductors such as Nvidia and Micron have experienced a drastic decline in market value recently.
- Investors concerned about AI displacing traditional software companies may need to reassess their investment strategies.
- The iShares Expanded Tech-Software ETF presents an attractive buying opportunity while it remains undervalued.
The iShares Expanded Tech-Software ETF (NYSEMKT: IGV) comprises over 100 distinct software stocks, featuring prominent entities such as Palantir Technologies, Microsoft, and Salesforce.
This exchange-traded fund has witnessed an 11% decrease this year, attributed to trepidation surrounding the potential disruption AI poses to the traditional software-as-a-service (SaaS) model.
The emerging threat is multifaceted. Firstly, there is apprehension that AI might diminish the global workforce, thereby impacting the revenue streams of SaaS firms that operate on a per-user pricing model.
Secondly, concerns are rife that AI-driven coding tools, exemplified by Claude Code, may enable companies to develop in-house alternatives to established software solutions, thereby jeopardizing the survival of legacy vendors.
Missed Nvidia in 2009? A Rare Indicator Is Flashing Once More. In 2009, a “Double Down” indicator surfaced for a then-obscure chip manufacturer known as Nvidia. Now, this same “Total Conviction” signal is emerging for a company that is merely one-hundredth the size of Nvidia.
However, the AI proliferation has recently encountered headwinds. Wall Street analysts are scrutinizing the viability of the recent surge in data center infrastructure investments due to the exorbitant costs of semiconductors and other essential components, which have rendered large-scale deployment of AI models financially unfeasible in numerous instances. This predicament might prove beneficial for the iShares Expanded Tech-Software ETF.
The AI Sector Faces Challenges
Leading American manufacturers of AI data center chips have seen a notable depreciation in stock prices over recent weeks.
Notably, Nvidia shares are down 16% from recent zeniths, while Advanced Micro Devices has seen a decline of 21%, and Micron Technology has plummeted by 33%.
The skyrocketing prices of chips and essential components have compelled AI companies, such as Anthropic, to implement gradual price increases on clients, prompting many to reevaluate their financial commitments.
For instance, Uber Technologies exhausted its entire AI budget for 2026 within four months due to the use of Anthropic’s Claude Code, and its COO asserted that justifying such expenditure is increasingly challenging.
Uber is not an isolated case. Investment banking powerhouse UBS Group recently conducted a survey revealing that 60% of businesses are reallocating tasks to more economical AI models to manage expenses. Moreover, Amazon and Walmart have instituted limits on employee AI usage to curb excess spending.
In an unexpected turn of events, a report by The Wall Street Journal published on July 26 indicated that major U.S. corporations are resuming human hiring, contradicting earlier projections of an impending workforce obliteration due to AI advancements.
In essence, the anticipated AI surge, which once seemed poised to disrupt the software market, now appears to be losing steam.
Investment Opportunity in Software ETF
Despite its extensive portfolio of 107 equities, the top ten holdings in the iShares Expanded Tech-Software ETF represent over half of its total valuation.
These leading positions encompass numerous frontrunners in vital industry sectors such as cybersecurity, enterprise solutions, and system infrastructure.
| Stock | iShares ETF Portfolio Allocation |
|---|---|
| 1. Palo Alto Networks | 9.62% |
| 2. Palantir Technologies | 8.66% |
| 3. Microsoft | 8.39% |
| 4. CrowdStrike | 6.85% |
| 5. Salesforce | 5.31% |
| 6. Oracle | 5.11% |
| 7. ServiceNow | 4.10% |
| 8. Applovin | 3.80% |
| 9. Adobe | 3.62% |
| 10. Fortinet | 3.58% |
Data sourced from iShares. Portfolio weightings reflect information current as of July 27, 2026, and are subject to change.
Palo Alto Networks and CrowdStrike stand among the preeminent global cybersecurity firms. Remarkably, these two stocks have surged over 50% this year, despite the overall downturn in the software sector.
AI’s evolution has created new vulnerabilities for cybercriminals, prompting enterprises to accelerate the fortification of their networks with advanced security measures.
Conversely, Palantir’s stock has struggled, recording a 26% decline year-to-date. Despite rising demand for its suite of AI-infused software solutions that aid organizations in deriving optimal value from internal data, its stock was previously inflated to unsustainable levels, culminating in its recent downturn.
Salesforce’s 27% drop this year largely stems from trepidation surrounding AI-induced job losses. Nonetheless, this company’s customer relationship management platform remains indispensable across more than 150,000 enterprises, and its expanding array of AI features may mitigate the need for customers to explore alternative offerings amid shifting technological landscapes.
Beyond its top ten holdings, the iShares ETF encompasses a host of software companies that have been adversely affected by AI-related anxiety.
These firms include Intuit, Atlassian, Workday, and HubSpot. Ironically, these very entities could be pivotal in driving a rebound for the iShares ETF, should the AI sector’s turbulence persist.
Is Now the Right Time to Invest in iShares Trust – iShares Expanded Tech-Software Sector ETF?
Prior to committing capital to the iShares Trust – iShares Expanded Tech-Software Sector ETF, contemplate the following:
The Motley Fool Stock Advisor analyst cohort has recently highlighted what they consider the 10 premier stocks poised for investor purchase right now… yet iShares Trust – iShares Expanded Tech-Software Sector ETF was notably absent from this selection.
The ten listings that succeeded in making the cut are anticipated to yield significant returns in the ensuing years.
For context, when Netflix was featured in this roundup on December 17, 2004, a $1,000 investment would now be valued at approximately $397,081!* Alternatively, when Nvidia appeared on this list on April 15, 2005, a $1,000 investment would have escalated to around $1,166,221!*
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Anthony Di Pizio holds positions in Atlassian. The Motley Fool maintains positions in and advocates for Adobe, Advanced Micro Devices, Amazon, Atlassian, CrowdStrike, Fortinet, HubSpot, Intuit, Micron Technology, Microsoft, Nvidia, Oracle, Palantir Technologies, Salesforce, ServiceNow, Uber Technologies, Walmart, and Workday.
The Motley Fool endorses Palo Alto Networks and recommends the following strategies: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. For further details, refer to the Motley Fool’sdisclosure policy.
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