Wall Street is searching for AI winners and losers

New York
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For years, anything exposed to artificial intelligence was a hot trade on Wall Street. But today’s investors are more selective, demanding stronger evidence that companies are poised to benefit from the AI boom.

Wall Street is debating whether software companies can protect their market share from AI startups’ new tools. Investors have grown skeptical of Big Tech’s plans to build data centers. But at the same time, they’ve continued betting on the chipmakers that power the AI boom.

Some software companies have emerged as potential AI losers, while hardware companies (think semiconductor chipmakers) continue to be AI winners. Popular exchange-traded funds highlight the divergence: The iShares expanded tech-software ETF is down 20% this year, while the VanEck semiconductor ETF is up 13%.

“The rising tide surrounding AI was lifting a lot of boats,” Steve Sosnick, chief strategist at Interactive Brokers, previously told CNN. “Now it’s forcing Wall Street to be much more selective and really decide who are the winners and losers. And that’s going to require a lot more detailed analysis, rather than just sort of riding the momentum train.”

A sell-off swept through software stocks last week after Anthropic — one of the world’s biggest AI startups — released new plug-ins for its Claude chatbot. The plug-ins improved the chatbot’s ability to do work-oriented tasks and stoked concerns that such AI tools could reduce businesses’ need for their existing software subscriptions.

Investors are split on whether the sell-off was overdone. But software companies will need to evolve to co-exist with improvements in AI, said Angelo Zino, tech analyst at CFRA Research.

Software companies that can leverage their own proprietary data and…

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