Amid an apparent market rotation out of the semiconductor sector, software stocks rose on Thursday with Palantir (PLTR), Salesforce (CRM), Datadog (DDOG), Monday.com (MNDY) and beaten Snow flakes (BORA) among the winners. With Thursday’s earnings, Palantir shares have advanced nearly 47% in 2024 while Salesforce stock is down 4%.

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Semiconductor stocks outperform software companies compared to artificial intelligence.

“It looks like a rotation trade,” TD Cowen analyst Derrick Wood said in an email. “There’s been a lot of money rotation out of software and into semis over the last few months and it just feels like the pendulum has swung too far. Yesterday/today we’ve seen a bit of a reversal with what looks to be a swing back into software in oversold conditions .”

of iShares expanded the technical software sector ETF ( IGV ), an industry index, looks set for a strong June performance after rising over the past six trading sessions.

“Our flows today and through this stretch are showing clear signs of rotation: real gain in semi/AI (artificial intelligence) names and the first signs of real demand in software,” a Jefferies report said. “It’s no secret that software exposures are historically low, while semi-exposures are high, and this extreme move shows the pain of this relaxation.”

With Thursday’s gains, the IGV index has gained about 10% in 2024 versus the Nasdaq Composite’s nearly 21% advance. Bellwether artificial intelligence action Nvidia ( NVDA ) fell 1.9% to 123.99 on Thursday.

Shares of the AI ​​chipmaker have retreated from an intraday high of 140.76 set on June 20. Nvidia stock is still up 149% in 2024.

Meanwhile, the Invesco PHLX Semiconductor Sector index fell 0.6% on Thursday to 5,421. That’s about 7% off its 52-week high of 5,792.

Software Stocks: AI Hype

The IGV software index rose 59% last year amid hype over AI stocks.

But application software makers in the enterprise market have struggled to monetize new AI-generating products and services. High interest rates have also weighed on software stocks.

On the stock market today, Palantir shares rose 4.7% to close at 25.22. Shares of Salesforce rose 4% to 252.85. Snow stock advanced 3.7% to 133.92.

SNOW stock has sunk 32% in 2024 despite Thursday’s gain. Snowflake faces stiff competition from privately held Databricks.

Meanwhile, Datadog shares rose 4.3% to 128.45. Service Now Shares (NOW) rose 2.7% to 774.13. Monday.com rose 2.6% to close at 236.28.

The IBD Computer Software-Enterprise group ranks 109 out of 197 industry groups tracked by IBD.

Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cyber security and cloud computing.

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