Software stocks, initially abandoned by investors over AI disruption fears, have rebounded as strong earnings reassured that software firms are still growing and AI leaders called for a pause in developing their most powerful models. Robert Pavlik of Dakota Wealth Management said reality has set back in and the worst-case scenario has moved away, though some disruption is likely as AI gets more powerful. The reversal of the long-chipmakers, short-software trade is the biggest sign: in the first half of 2026, the Philadelphia Stock Exchange Semiconductor Index (SOX) doubled while the iShares Expanded Tech-Software Sector ETF (IGV) sank 14%; since then, SOX is down about 19% and IGV has risen 17%. Security software is doing particularly well, with a Goldman Sachs basket of cybersecurity stocks surging 65% this year. An encouraging earnings season kickstarted the move, with 100% of software companies in the S&P 500 beating expectations by an average of more than 13%, according to Bloomberg data, and more than 80% posting better than anticipated revenue. Microsoft Corp. had its biggest one-day jump since October 2008 after showing substantial acceleration in cloud growth.