Palantir and These Software Stocks Slide in Seesaw With Chip Giants

Palantir stock has slid this year due to concerns about how AI will disrupt the software industry. (Patrick T. Fallon/AFP via Getty Images)

Key Points

• Palantir and Microsoft shares fell in premarket trading on Wednesday as chip and optical networking stocks rallied.
• The rally in chip and networking stocks followed strong earnings reports that signaled robust demand for artificial intelligence.
• Investors expect artificial intelligence to disrupt software because the development of vibe-coding tools could make some products obsolete.

It may as well be an adage at this point that when chip and networking stocks go up, software must come down.

That dynamic was playing out early Wednesday, with Palantir and Microsoft among the S&P 500’s worst performers ahead of the opening bell as the AI trade mounted a comeback.

Palantir slid 1.3% and Microsoft dipped 0.7% in the premarket. Salesforce , ServiceNow , and Workday were among the other software stocks trading in the red.

The moves came as shares of chip and optical networking companies rallied, following a strong batch of earnings reports that signaled to the market that demand for AI remains robust.

Created with Highcharts 9.0.1Source: FactSetAs of Aug. 11, 4 p.m. ET

Created with Highcharts 9.0.1MicrosoftPalantir2026Aug.-45-40-35-30-25-20-15-10-50510%

Software and chip stocks tend to move in different directions—and that’s it’s all tied to how investors view the two industries in relation to AI.

Chips are needed to power large-language models, while the boom in construction of data centers has also driven up demand for optical cables and other networking products.

At the same time, AI is expected to significantly disrupt software because the rapidly development of so-called vibe-coding tools is expected to make some existing products obsolete.

The dynamic works both ways, though. Palantir and Microsoft have surged 35% and 24%, respectively, over the past three months, benefiting from concerns that chip stocks have become overvalued.

Write to George Glover at george.glover@dowjones.com

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