For more than a decade, the winning trade was almost embarrassingly simple: buy software companies with their infinite scalability, ignore oil and gas as relics of a dying era, and watch your portfolio climb.

That playbook just got ripped to pieces in early 2026.

When Oil Services Embarrass Software

After spending nearly two decades in the penalty box following the 2008 financial crisis, energy stocks are mounting a comeback that's hard to ignore. The Energy Select Sector SPDR Fund (XLE) has already beaten the Technology Select Sector SPDR Fund (XLK) by 19 percentage points year-to-date through February 3.

Energy dominated the S&P 500 leaderboard in January with a 14.4% gain, followed by materials at 8.8%. Bank of America analyst Nigel Tupper points out that surging crude prices have effectively offset rising geopolitical tensions in Venezuela, Iran, and Greenland.

But the real carnage is happening in a more specific corner of the market.

Year-to-date, the VanEck Oil Services ETF (OIH) has absolutely demolished the iShares Expanded Tech-Software Sector ETF (IGV) by more than 50 percentage points. That divergence was powered by a historic 40-point performance gap in January alone.

The Death of Software (According to the Macro Crowd)

"Software is dead," macro strategist Andreas Steno Larsen declared in a Tuesday social media post.

Larsen, who founded Steno Research, argues that the undisputed market darling of the past decade is facing an existential crisis.

"The 'Golden Child' of the last decade is facing a brutal reality check. For years, Private Equity and Credit treated software as an infinite money printer. Today, those 24x multiples are being vaporized by AI-driven commoditization," he added.

The core thesis is straightforward: we're moving from a "virtual" economy to a "physical" one. AI isn't just another software tool anymore—it's actively killing the software business model. When companies can build their own functionality using AI agents and Python setups, why pay for expensive, seat-based SaaS subscriptions?

Jordi Visser, head of AI Macro Nexus Research at 22V Research, compared this software collapse to appetite suppression from GLP-1 weight-loss drugs.

"When software can be generated, modified, and orchestrated by agents at near-zero marginal cost, the entire buy-side market isn't just disrupted—it's suppressed," Visser wrote.

In this view, we're experiencing a "Great Deflation" where the market realizes that demand for high-value software was actually propped up by the inefficiencies that AI now eliminates.

Atoms Beat Bits

Here's the kicker: while code is becoming cheap and plentiful, the physical infrastructure needed to run it all—power grids, data centers, copper wiring, specialized chips—has hit hard scarcity limits.

"We are transitioning from an era where we paid for the process to one where we only pay for the result," Larsen said.

In this new world, the real margins are shifting away from the code itself and toward the tangible infrastructure that actually builds and powers everything.

The investment message for 2026 is crystallizing: bet on the physical world, not the virtual one.