Despite a broadly positive first half for equities, a significant cluster of S&P 500 stocks has suffered steep double-digit losses through mid-2026.
Within the S&P 500, 62% of stocks have shown gains for the first half of 2026, leaving the remaining 38% in negative territory.
The same focus on generative artificial intelligence that helped send manufacturers of computer memory equipment soaring has sent shares of a number of software and online-services companies plunging.
Intuit (INTU) has been among the hardest hit, with shares declining 60% this year even as sales for its most recent fiscal quarter ended April 30 were up 10%.
The rolling consensus 12-month EPS estimate for Intuit has increased 10% this year, yet its forward P/E has collapsed to 9.8 from 26.8 at the end of 2025, now less than half that of the S&P 500.
Susquehanna analyst James Friedman told MarketWatch that “the AI narrative and lower-priced filing alternative had driven the collapse of Intuit’s shares.”
Friedman noted that investors are concerned AI may present a “substitute” for TurboTax, the tax preparation software that has long been one of Intuit’s flagship products.
Lululemon (LULU) stands out among the worst performers with the largest decline in rolling 12-month EPS estimate among the group of battered stocks.
Lululemon’s sales for its fiscal quarter ended May 3 were up 4% from the year-earlier quarter, but its quarterly earnings per share declined by 31% to $1.69.
William Blair analyst Arjun Bhatia told MarketWatch that although price-to-earnings multiples have come down, the fundamentals for many software companies have been “solid,” which the market is not rewarding.
“The market is saying there is an opportunity cost to holding software stocks,” Bhatia said, pointing to semiconductor stocks that have “exploded” this year as investors chase AI-driven infrastructure plays.
Bhatia described the current investment environment bluntly, saying “the party is happening in physical infrastructure,” with money flowing toward data centers, energy, semi-cap equipment, semiconductors, networking, and construction.
He added that if AI is to benefit software companies, “it’s going to happen in another 12 to 36 months,” suggesting investors remain patient but skeptical in the near term.
The energy sector has been the strongest performer so far this year because of supply disruptions caused by the conflict between the U.S., Israel, and Iran.
The sharp rotation away from software and toward physical infrastructure reflects a broader market conviction that AI’s near-term winners are those building the hardware and power systems that large language models depend on.
