Analysts say strong AI-driven earnings are supporting tech stocks, but diverging trends between semiconductors and software are creating a more nuanced market outlook.
Semiconductors Over Software: Why This Analyst Is Betting On Chips
MarketDash
AI-driven earnings bolster tech, but chipmakers and software diverge. Analysts weigh if semiconductors are overheated or the market's anchor.
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Earnings Strength and AI Demand Anchor Tech
Trivariate Research's Adam Parker told CNBC on Monday that robust earnings growth—especially in semiconductors—is underpinning the broader market.
He noted expectations for 43% tech earnings growth in 2026 and 25% in 2027, largely driven by chipmakers like NVIDIA Corp (NVDA).
Parker added that even if those forecasts moderate, earnings strength should help limit downside risk.
Similarly, Wedbush's Dan Ives said his Asia checks made him "incrementally more bullish," highlighting strong demand across chip supply chains and noting that the AI buildout shows no signs of slowing, with "no immediate supply risks."
Diverging Views on Semiconductors
Parker maintained a preference for semiconductors, calling them his "North Star" due to their earnings power and central role in the multi-year AI buildout, which he does not view as a bubble.
In contrast, BTIG's Jonathan Krinsky warned that semiconductor stocks look overheated after a strong run, noting they are trading about 17% above their 50-day moving averages and showing "too much cheer," which could lead to a near-term pullback.
Software Outlook Split Between Risk and Rebound
Parker said software is "structurally in trouble," citing high obsolescence risk, pressure on valuations, and sharper declines for companies that miss expectations.
However, Krinsky said software still has upside and continues to show momentum, while Ives pointed to a rebound in the sector, calling the earlier sell-off "the most disconnected" he has seen.
Ives added that the AI cycle remains early—"the top of the third"—with companies like Palantir Technologies Inc (PLTR) and ServiceNow, Inc (NOW) serving as key indicators of adoption.
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