Software is the standout performer in today’s intraday movers, driven by a combination of factors. According to UBS analysts, the sector is more resilient to AI disruption due to its data and infrastructure exposure. Earnings from DDOG have also contributed to the upswing, with investors viewing the company as more immune to the threat of AI.

The high growth SaaS basket has seen an even more pronounced move, up by 3%, while the software sector as a whole has outperformed semis by 2.5%. This rare outperformance is a positive sign for investors who have been concerned about the impact of AI on traditional software companies.

Meanwhile, yields have declined, with the 10-year US Treasury yield hitting a 1-month low. This has led to higher rate geared pockets underperforming, such as large cap banks and inflation beneficiaries. However, profitless tech, housing, and internet sectors have outperformed, with profitless tech leading the way with a 1.8% gain.

The 7 mega-caps have trailed the S&P by 4 percentage points YTD and 7 percentage points since the November peak, highlighting the ongoing underperformance of these stocks. However, today’s gains in software could be a sign that this trend is reversing.

Overall, the bounce back in software is a positive development for investors who have been concerned about the impact of AI on traditional software companies. With yields declining and higher rate geared pockets underperforming, there may be opportunities for profit taking in these sectors. However, the outperformance of software against semis suggests that this sector could continue to lead the way in the near term.