05/02/2026

By Jacques-Aurélien Marcireau, Co-Head of Equities, Edmond de Rothschild AM (France)

Historically, the roles were clearly defined: semiconductors were associated with cyclicality and close sensitivity to the macroeconomic cycle, while software was driven by secular, structural growth.

Today, we are witnessing a reversal of roles. The software industry has matured, and the laws of gravity and economics are beginning to apply, especially as software now represents a significant share of corporate budgets. At the same time, the semiconductor world has temporarily detached itself from economic reality, buoyed by a super cycle that combines technological disruption with excessive ambitions, reinforced by a textbook case of the prisoner’s dilemma .

Tactical investors have got it right: in the short term, semiconductors offer a cascade of upward earnings revisions – which algorithms also tend to favor – while software companies continue to grow but are unlikely to surprise. As a result, a now popular technique is to bet on a decline in software and a rise in semiconductors.

Less conscientious observers will see recent market swings as confirmation of predictions that artificial intelligence will disrupt software, a narrative pushed since April 2025 mainly by those in the AI camp who need to raise $110 billion within three months to meet their commitments. AI will undoubtedly have a profound impact on our economic fabric over time, but mapping these predictions onto the current situation is weak from a causality standpoint, given that mass layoffs have not yet truly started in call centers supposedly “disrupted” for three years now.

Let's not fool ourselves, we are experiencing a stock market blip: once we move past the current market configuration, there will be as many victories and setbacks on the semiconductor side as on the software side. 

The fourth quarter 2025 earnings season has so far illustrated this dynamic perfectly: ServiceNow, Manhattan Associates, Roper Technologies, and even SAP and Microsoft are struggling to generate investor enthusiasm despite solid growth.

As long-term investors, we welcome the opportunities offered by such simplistic asymmetries. It is clear that we must remain selective in the software world, but now more than ever, patience, rather than information, is the most important virtue when investing in liquid markets as this is the only asset class where it is not required by default.

Performance of indices representing the semiconductor and software sectors (base 100) since December 31, 2024.


(Source: Edmond de Rothschild Asset Management – Bloomberg)
Past performance and volatility are not indicative of future performance and volatility, are not constant over time, and may be independently affected by changes in exchange rates. The performance figures shown do not take into account the costs and fees incurred when issuing and redeeming units, but include ongoing charges, intermediation fees, and any performance fees charged.

1. The prisoner's dilemma characterizes a situation in which competing economic actors, who do not communicate with each other, make rational decisions based on the pursuit of their own interests but, in doing so, undermine the collective interest.

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February 2026. This is a marketing communication.
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