These two graphs capture the essence of the AI stock surge in 2026

Main Insights

• The surge in artificial intelligence continues to boost the stock prices of memory device manufacturers such as Sandisk, as well as companies that supply equipment for chip production like Lam Research.

• Conversely, software companies are lagging behind, as investors fear that AI may pose more risks than benefits to this sector.

Artificial intelligence is once again igniting a powerful rally in technology stocks, but not every sector is benefiting equally.

In early 2026, companies specializing in memory and data storage devices experienced significant stock price increases, driven by a shortage of the hardware needed to develop and operate AI systems. For example, Sandisk (SNDK) saw its stock price double in less than a month, while Western Digital (WDC) and Micron (MU) each rose by over 30%.

Chip equipment suppliers, whose products are crucial for designing and manufacturing the semiconductors powering AI, have also seen impressive gains. Lam Research Corp. (LRCX) climbed more than 25% by Thursday, with Applied Materials (AMAT) and KLA Corp. (KLAC) both advancing nearly 20%.

Significance of These Trends

For over three years, the AI boom has been a major driver of the stock market. However, the focus of investors has shifted over time, with different sub-sectors and industries gaining attention as new challenges in AI infrastructure arise.

Intel (INTC) stands out as one of the top performers in the S&P 500 this year. Wall Street is optimistic that federal investments and support from AI leader Nvidia (NVDA) could help the company recover after years of difficulties. However, the stock dropped sharply on Friday following a disappointing quarterly forecast, with CEO Lip-Bu Tan cautioning that the company’s recovery will take several years.

On the other hand, software stocks have struggled as concerns mount that AI may currently represent a greater challenge than an opportunity. Some experts advise caution regarding these stocks.

Major software firms such as Intuit (INTU), ServiceNow (NOW), Adobe (ADBE), and Salesforce (CRM) are among the poorest performers in the S&P 500 this year. Investors worry that AI-focused startups could capture market share from established enterprise software companies, whose adoption of AI tools has been slower than anticipated. Additionally, AI is seen as a potential threat to the seat-based pricing model that underpins the profitability of many software-as-a-service businesses.

Another reason for the pessimism is that most software companies are not seeing the same level of financial benefit from AI as the “pick-and-shovel” providers like Nvidia—at least not yet. While software leaders can point to modest improvements in profit margins due to AI efficiencies, investors are more enthusiastic about companies like Micron, which recently announced that its high-bandwidth memory chips are sold out for the year thanks to AI demand.

Spotlight: Applovin’s Unique Trajectory

One notable exception among software companies is Applovin (APP), a digital marketing software provider. The company’s stock skyrocketed by over 700% in 2024 and doubled again the previous year, driven by robust revenue and earnings growth attributed to its AI-powered platforms. (Some short-sellers claim this rapid growth is due to questionable business practices.)

However, Applovin’s previous stock surge is a key reason it is now the worst-performing stock in the S&P 500 this year. As investor sentiment toward software has soured and new allegations of illegal activity involving Applovin’s platforms have emerged, many have taken profits, leading to a 22% decline heading into Friday’s trading session.