Software Stocks Outshine Chips in August, But History Warns of a Tougher September

Software stocks delivered one of their strongest monthly performances in years, while semiconductor stocks struggled to hold onto early gains. The iShares Expanded Tech-Software Sector ETF climbed more than 15% in August, compared to just a 1% gain for the iShares Semiconductor ETF. The S&P 500 rose about 2.5% over the same period. Chip stocks had briefly kept pace with software earlier in the month, but gave back most of those gains during the final two weeks while software continued climbing.

AI Infrastructure Trade Loses Steam

Companies tied to the physical infrastructure of the AI boom, including electrical equipment, power systems, networking hardware, and construction firms, had also rallied through mid-August before pulling back sharply. Since August 17, 58 out of 61 semiconductor stocks tracked in a Yahoo Finance basket declined, erasing roughly $1.1 trillion in combined market value. This widened an already record gap between software and chip stock performance.

Individual Software Names Lead the Charge

Several software companies posted standout results. Atlassian nearly doubled in value for its best month on record, while Palantir gained more than 50%. Salesforce rose over 40% in its strongest month since 2005, ServiceNow climbed more than 30%, and CrowdStrike advanced over 20%. A broader software index tracked by the S&P gained around 14%, marking its best August since 1990.

After September 15, performance typically weakens across the board, with software returns falling about 1%, the S&P 500 dropping nearly 2%, and semiconductors sliding around 3.5%. With only twelve data points, this is described as a tendency rather than a firm prediction. September has also historically been the weakest month for the S&P 500 overall, with volatility often increasing as the season shifts.