- NVDA
- IGV
Nvidia (NASDAQ: NVDA) has unquestionably been one of the biggest beneficiaries of the artificial intelligence (AI) boom. The next phase of the AI trade, however, might be dominated by something completely different.
The one exchange-traded fund (ETF) I’m watching here to take advantage of this next phase is the iShares Expanded Tech-Software Sector ETF (NYSEMKT: IGV). Just as heavy AI development was hurting the long-term investment case for software, a potential push to slow AI development could conversely be the factor that drives software shares higher again.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger.Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout.Continue »
For the most part of 2026 so far, semiconductors have been huge winners, while software stocks have struggled. This fund was down more than 14% through the end of June while the VanEck Semiconductor ETF (NASDAQ: SMH) gained more than 80%.
In the second half of 2026, that trend started to reverse. This quarter, the iShares Expanded Tech-Software ETF is up 15% while the VanEck Semiconductor ETF is down 14%.
There are a few catalysts causing it, and they may be in place for a while.
Software would benefit from an AI development slowdown
Some of the earliest winners of the AI trade were the chip manufacturers and those companies providing the components that drive artificial intelligence capabilities.
But one of the sectors that lagged badly was software. Many people believed that AI and tools like Claude Code would replace the need for software development. While stocks even tangentially tied to AI growth were delivering big returns, investors worried that the software sector could soon become irrelevant.
That’s changed over the past month or two.
The biggest AI narrative is whether development is happening too fast and security protocols are keeping up with the pace. Several prominent AI company executives have said that the pace of development should slow. If rapid AI infrastructure building helped cause software stocks to recover, it stands to reason that a slowdown in that build could turn them into leaders.
Cybersecurity has also gotten a lot of attention lately for those same security concerns. Companies like CrowdStrike (NASDAQ: CRWD), Cloudflare (NYSE: NET), and ZScaler (NASDAQ: ZS) have produced huge returns over the past months on the belief that companies will need to spend more on product security.
