By Angela Palumbo
Software stocks are having a great week following a challenging year as Wall Street reevaluates the artificial intelligence risk story. The question remains if this rebound will last.
Software companies like ServiceNow, Salesforce, Oracle, and Intuit have rallied in recent days. The iShares Expanded Tech-Software Sector ETF, or IGV, has gained 15% this week and is on track for its best week since Oct. 5, 2001, according to Dow Jones Marker Data.
"Software stocks are rebounding because they were one of the hardest hit areas of the market heading into and during the Iran crisis," Robert Schein, chief investment officer at Blanke Schein Wealth Management, told Barron's.
The Dow Jones Industrial Average was up 2.3.% on Friday as the market celebrated news that Iran said it would reopen the Strait of Hormuz.
Schein also said that investors are "coming to the realization that the software space had priced in the worst case AI scenarios that are likely not going to come to fruition."
The IGV ETF has fallen 19% in 2026 and 27% from its all-time closing high of $117.79 on Sept. 22, 2025. Wall Street started to pull back from the space amid concerns that AI could one day replace critical software functions, especially as AI start-up Anthropic has continued to launch impressive updates to its models.
There has been several times this year that software stocks have dropped in response to Anthropic announcements regarding AI updates, but that didn't happen on Thursday after the company announced that its latest model, Claude Opus 4.7, had become generally available. The IGV ETF still closed up 1.7% that day.
"Many investors beginning to understand that OAI/A [OpenAI/Anthropic] use many of the top software companies in the world to run their own business, so how could the thesis that 'they will replace' be true?," Jefferies analyst Brent Thill told Barron's.
Not all experts are confident that this software rally will last, though.
"I don't think this disruption's over. I mean, we're gonna have a new model from OpenAI and new things from Anthropic as the year goes on. So this will be touch and go for a while, but I just think we're having a massive short covering rally and people are looking to spread it out," research analyst Ben Reitzes told Barron's.
Reitzes point was proved on Friday after Anthropic announced that it was launching Claude Design, a new Anthropic Labs product that lets users collaborate with Claude to create visuals. Adobe shares dropped 1.1% following the announcement.
Write to Angela Palumbo at angela.palumbo@dowjones.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
April 17, 2026 14:34 ET (18:34 GMT)
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