Investopedia Markets News (all except PF)

News of the day for Feb. 4, 2026

The Dow Jones Industrial Average hit a record high yesterday morning before reversing course and finishing the day lower.

Spencer Platt / Getty Images

Stock futures are little changed this morning after a downturn in tech shares sent major indexes lower on Tuesday; AMD stock is sharply lower as the bar remains high for chipmakers to impress investors with their earnings reports; shares of a wide range of companies, including Eli Lilly, Chipotle, Uber and Super Micro Computer are making big moves this morning following the release of quarterly results; Google parent Alphabet is scheduled to release its earnings report after the closing bell; and shares of Silicon Laboratories are surging following news it will be acquired by Texas Instruments. Here's what you need to know today.

Stock Futures Little Changed After Tuesday's Tech-Fueled Sell-Off

Stock futures are mixed as investors evaluate earnings reports from a wide range of companies. Futures tied to the Dow Jones Industrial Average and S&P 500 were up 0.2% and 0.1%, respectively, while those connected to the tech-heavy Nasdaq slipped 0.2%. All three major indexes sank on Tuesday as a pullback in tech stocks dragged the markets lower. Gold futures are gaining again, up 3% and trading back over $5,000 an ounce after a sharp drop last Friday that extended into Monday. Bitcoin is little changed this morning, trading around $76,000 after briefly sinking below $73,000 yesterday, the cryptocurrency's lowest point since Nov. 2024. The yield on the 10-year Treasury note, which affects borrowing costs on all sorts of consumer loans, was holding steady at 4.27%.

AMD Stock Sinks as AI Trade's High Expectations Weigh on Chipmaker

Shares of Advanced Micro Devices (AMD) fell sharply in premarket trading even as the chipmaker's quarterly results topped Wall Street expectations. Record revenue of $10.27 billion and adjusted earnings per share of $1.53 each came in better than the consensus of analysts surveyed by Visible Alpha. However, the chipmaker's first-quarter projection of $9.5 billion to $10.1 billion may have been more conservative than some investors had hoped, with revenue expected to decline quarter-over-quarter. Results from AI-related companies have been under the microscope this earnings season amid concerns about spending in the sector, and fears that the rally of the last few years has left some in the AI trade overvalued, even as demand looks strong for chipmakers such as AMD and analysts stay bullish. AMD shares were down 9% recently.

Google Parent Alphabet Reports After the Bell Today

Investors will get more data on the AI trade when Alphabet (GOOGL) releases it fourth-quarter results after the market closes today. Analysts expect the Google and YouTube parent to report $111.4 billion in revenue along with adjusted earnings per share of $3.09. Some analysts said recently that they will be looking for signals of strong AI demand for Google's cloud computing services, along with more details about the tech giant's deal announced last month for Apple (AAPL) to use Google Gemini models for its upgraded version of Siri and other AI features. Another Magnificent Seven member is also set to report earnings this week, with Amazon (AMZN) slated to post results after the closing bell on Thursday. Alphabet shares were up about 1% in recent premarket trading.

Several Big-Name Stocks Making Big Moves After Earnings

Earnings reports have come at investors fast and furious already this week, and several stocks are on the move after companies issued results late yesterday and early this morning. Eli Lilly (LLY) shares were up 9% recently after the pharmaceuticals giant's earnings and outlook topped expectations, while shares of rival Novo Nordisk (NVO) slid 5% after the company issued a disappointing outlook. Among other noteworthy post-earnings movers: Chipotle Mexican Grill (CMG) was down 6% and Uber Technologies (UBER) slid 5%, while Super Micro Computer (SMCI) surged 12%, and Take-Two Interactive (TTWO) and Match Group (MTCH) each gained 7%.

Silicon Laboratories Stock Surges on Deal with Texas Instruments

Shares of Silicon Laboratories (SLAB) are soaring this morning following an announcement that the chipmaker will be acquired by Texas Instruments (TXN). The deal will see Silicon Laboratories shareholders get $231 per share, valuing the company at about $7.5 billion, and is expected to close in the first half of next year, the companies said Wednesday. The news follows a Financial Times report from Tuesday night that said a deal was close to being done and could be announced in the next few days. At Tuesday's close, the chipmaker had a market capitalization of just under $4.5 billion. The deal is Texas Instruments' biggest acquisition since 2011, per the Financial Times. Silicon Laboratories shares were recently up 51% at around $206, their highest level in four years. Shares of Texas Instruments, which have gained 25% over the past year, were down 4% ahead of the opening bell.

Budweiser's iconic Clydesdales are expected to appear in Super Bowl ads again this year.

Kevin Carter / Getty Images

Key Takeaways

• Brands are releasing teasers for their Super Bowl commercials, which this year are set to feature well-known figures such as Lady Gaga, Ben Stiller, Bowen Yang and Emma Stone.
• Companies are spending some $10 million for 30 seconds of airtime during one of the most watched events. And some people are betting on which companies will pony up.

Companies are encouraging football fans to do some pregaming.

Brands are teasing Super Bowl commercials, encouraging those who can’t wait for the Seattle Seahawks to take on the New England Patriots next weekend—or for the glitzy ads and elaborate half-time show associated with the championship. The Super Bowl, one of the most-watched television events around, generates millions of dollars in ad revenue from firms looking to get in front of its audience.

Brands selling everything from software to snacks are trying to build buzz for their Super Bowl LX ads before they air. Real estate listing company Redfin released footage of musician Lady Gaga performing the theme song from Mister Rogers’ Neighborhood for its upcoming ad. Svedka vodka shared a clip of a dancer teaching choreography to a robot slated to perform in a commercial. Budweiser, a Big Game advertising fixture, published an entire 60-second ad—starring a young Clydesdale horse and baby bald eagle—ahead of Sunday's broadcast.

Brands aren’t the only ones hoping to cash in on Super Bowl commercials. People are betting tens of thousands of dollars on which companies will run ads via Kalshi and Polymarket, online prediction markets.

Why This News Matters to You

The stakes may be higher than usual for Super Bowl advertisers. A number of marketing campaigns have sparked controversy in recent months, including American Eagle ads and Cracker Barrel's revised logo, and millions tune into to the big game—many expressly to see, and opine upon, the year's ads.

Marketers are relying on a number of high-profile figures to generate hype. Ritz (the cracker, not the hotel) featured comedian Bowen Yang in a promo; Instacart (CART) tapped actor Ben Stiller; and Squarespace (SQSP) featured actress Emma Stone. PepsiCo (PEP) appears to have recruited the polar bear from vintage Coca-Cola (KO) ads to sit for a blind taste test.

A record 128 million watched the Super Bowl last year, according to Nielsen. The cost of airing an ad has grown alongside the game's viewership, with 30-second clips now costing $10 million, according to USA Today.

The “extravagant” overall cost—$16 million to $29 million for a typical 30-second ad, which includes production and other costs as well as air time—makes sense for companies with a large marketing budget, said Zachariah Reitano, co-founder of the telehealth company Ro. The game presents a unique opportunity to reach an engaged audience who view the material as "content, not as ads!" he said on X.

Analyzing Super Bowl commercials has become a national pastime of sorts. USA Today taps a panel to rate ads each year, while Northwestern's Kellogg School of Management publishes an annual analysis of them.

“People rank Super Bowl ads," Reitano said, while explaining why Ro is running its first Super Bowl commercial. "They rewatch them. They critique them. They talk about them at work the next day."

The U.S. is estimated to have a shortage of several million homes

I RYU / VCG / Getty Images

Key Takeaways

• Homebuilder stocks climbed Wednesday, extending Tuesday's gains following a report that the industry is making an affordability-focused pitch to the White House.
• A "Trump homes" proposal could see hundreds of thousands of new homes built for a rent-to-own program, Bloomberg reported.

Several homebuilder stocks got a boost following a report the Trump administration is considering a program to build more new homes.

Lennar (LEN) and other homebuilders have worked on a pitch to the Trump administration to build up to 1 million new homes that could become part of a rent-to-own program, Bloomberg reported Tuesday.

Shares of Lennar surged over 5% in recent trading, after adding 3% Tuesday in the wake of the report. Taylor Morrison Home Corp. (TMHC), KB Home (KBH), PulteGroup (PHM), and D.R. Horton (DHI) also rose, extending Tuesday's gains during a weak stretch for broader markets that saw the S&P 500 decline.

A White House official told Investopedia the Trump administration "is constantly exploring new policy actions" related to affordability, but characterized reporting ahead of an official announcement as "speculation." Lennar declined to remark on the report. A spokesperson for Taylor Morrison said that while the company hasn't worked on the plan, it's "ready to work alongside our builder peers to support more Americans in achieving homeownership.”

Why This News is Significant

The Trump administration has taken steps to explore a number of proposals around housing affordability, including different methods to lower mortgage rates or change the structure of a typical mortgage.

One version of the proposal floated by homebuilders could see the companies build and sell entry-level "Trump homes" backed by private investors, per Bloomberg. Those homes would then offer a pathway to ownership for renters, in which the first three years of rent payments could be counted toward a down payment, the report said.

However, many details such as the potential involvement of federally-backed mortgages, have yet to be ironed out, Bloomberg reported.

UPDATE—Feb. 4, 2026: This article has been updated since it was first published to reflect more recent developments.

The Small Business Administration, under the leadership of Kelly Loeffler, will no longer lend to businesses if they have any non-citizen ownership.

Kent Nishimura / Bloomberg / Getty Images

Key Takeaways

• The Trump Administration is barring businesses with any amount of non-citizen ownership from receiving federal small business loans starting March 1.
  
• The new policy excludes lawful permanent residents from obtaining loans, potentially affecting more than 5 million people based on U.S. Census data.
  
• Critics blasted President Trump's restrictions on business loans as damaging to the economy and demonizing immigrants.
  

The Small Business Administration is cutting off lending to any business with any amount of non-citizen ownership, excluding more than 5 million business owners from federal loans.

Starting March 1, the SBA will no longer lend to businesses if any of their ownership is not a citizen, down from the 5% foreign ownership currently allowed. The move, announced Monday, is the latest step in President Donald Trump's efforts to cut off legal immigrants from government funding and services. Before Trump took office again in 2025, the SBA gave out loans to businesses as long as they were at least 51% owned by citizens or lawful permanent residents. (Illegal immigrants were already excluded.)

By removing the ability of lawful permanent residents to receive loans, the SBA is potentially affecting millions of businesses.

The SBA does not publicize how much of the  $44.8 billion its two largest programs lent in fiscal 2025 went to noncitizen business owners. However, according to the Census Bureau, noncitizens make up a significant percentage of small business owners: in 2023, 5.2 million owner-operators were not citizens, or 15.9% of all non-employer businesses in the country.

What This Means For The Economy

Although the SBA did not publicize how many people will be affected by the new policy, the administration's restrictions on business loans could hinder the ability of many small businesses to get funding, which critics say will damage the economy.

The SBA said in its Monday announcement that the changes are consistent with an executive order Trump issued the first day of his presidency titled  "Protecting The American People Against Invasion,"  which started a government-wide crackdown on immigration. In addition to the new restrictions on SBA loans, the administration has made some legal immigrants ineligible for other government benefits such as Medicaid coverage and food stamps.

Critics of the administration say the changes are hurting law-abiding immigrants and businesses with part-immigrant ownership.

"Small businesses use SBA loans to create jobs and invest in their operations," a group of Democratic lawmakers led by Massachussett Senator Ed Markey wrote in a letter to the SBA in December. "Unfortunately, the Trump administration is demonizing immigrant communities and picking winners and losers, rather than basing lending decisions on a small business’s ability to repay a loan."

Tom Williams / CQ-Roll Call, Inc via Getty Images

Key Takeaways

• President Donald Trump signed a bill funding the government through Feb. 13, ending a shutdown that began Saturday.
  
• The shutdown delayed the release of a key report on the job market that was expected Friday.
  
  

The latest government shutdown is over after less than two business days.

President Donald Trump signed a bill on Tuesday that funds most government agencies through the fiscal year, ending a partial shutdown that began Saturday. However, the bill only extends the Department of Homeland Security's funding until Feb. 13. Lawmakers will use the 10-day reprieve to debate new restrictions on immigration enforcement.

The government shut down over the weekend after Democrats refused to fund the Department of Homeland Security following a fatal shooting in Minneapolis by federal agents during protests over immigration enforcement efforts.

What This Means For The Economy

The economy has avoided for the time being another long shutdown, which could have damaged economic growth by delaying paychecks for federal workers and shutting down government services.

Although the shutdown was brief compared to the one in October and November that lasted a record 43 days, it still managed to cause some economic disruption by delaying a highly anticipated report on the labor market that was scheduled for Friday.

And while the government is open now, there's no guarantee it will stay that way next week when the new deadline expires. The measure passed the House of Representatives in a narrow 217-214 vote on Tuesday, indicating how divided lawmakers are over the immigration enforcement issue, keeping the risk of another disruption alive.

Clarification, Feb. 4, 2026: This article has been updated to better delineate which parts of the government were funded through the fiscal year.

Bitcoin touched levels not seen since 2024 today, though it later recovered a bit.

Jakub Porzycki / NurPhoto via Getty Images

Key Takeaways

• The price of bitcoin briefly fell below $73,000 today, dropping to levels unseen since Nov. 2024.
• Crypto linked stocks including Coinbase, Strategy, Circle and Gemini have fallen at least 15% in the last five trading days.

Crypto can't catch a break.

Bitcoin hit new lows for the year on Tuesday, briefly breaking below $73,000 to levels not since November 2024, according to data firm Messari. Crypto-linked stocks including Coinbase (COIN), Strategy (MSTR), Circle (CRCL) and Gemini (GEMI) swooned alongside the cryptocurrency, each of them notching declines of at least 15% over the past five trading days.

When the crypto complex will get a reprieve is anybody's guess. Some experts thought there might be a "value zone" in the mid-$70,000s; the coin recently changed hands above $76,000. Tuesday's swoon coincided with a sell-off in risk assets, with big U.S. tech stocks diving, weighing on major broad market indexes. Meanwhile, gold and silver prices rebounded.

WHY THIS MATTERS TO YOU

Bitcoin dropped to longtime lows today on a down day for risk assets, though it managed to rebound around the time of the stock market's close. That may offer some relief to crypto investors worried about the slide in the leading currency, though some analysts think it can fall considerably further.

CNBC's Jim Cramer made a direct plea to bitcoin whale Michael Saylor and Strategy, the company he founded, to step in and stop the bleed.

"Memo to Michael Saylor, we think that $73,802 is the line in the sand for bitcoin. Time to do another zero coupon convert and stop this decline," he said on social media, referring to a type of financial transaction Strategy has used to fund the company's bitcoin purchases. (Strategy has continued to buy bitcoin lately, the company said earlier this week.)

Guesses as to where bitcoin prices go next this month aren't all that optimistic. Bettors on a related Polymarket events contract recently placed the highest probability, or 48%, on bitcoin prices hitting $70,000 or below.

A shorter-term events contract on Kalshi—"Bitcoin price on Friday at 5pm EST?"—doesn't imply good news for crypto investors either: Bettors place the highest probability on bitcoin prices ending below where they are now by the end of February.

Stocks slumped on Tuesday, with the software industry leading losses among hard-hit tech stocks.

Michael Nagle / Bloomberg via Getty Images

Key Takeaways

• Key gauges of market sentiment turned negative negative on Tuesday as software stocks slumped, deepening their losses since the start of the year.
• Software stocks have been hammered this year by concerns about AI disruption, and the release of workplace productivity tools from AI startup Anthropic on Tuesday amplified those fears.

Markets were on edge as this year’s software stock slump picked up steam. 

The tech-heavy Nasdaq dropped 1.4% Tuesday, weighed down by sinking tech stocks. The benchmark S&P 500 pared losses to close down about 0.8%, and the blue-chip Dow Jones Industrial Average, which this morning hit a record high, slid 0.3%. (Read Investopedia's live markets coverage here.)

The Cboe Volatility Index, often called the “Fear Index,” surged above 20, a reading that generally indicates mounting unease—though not panic—on Wall Street. Gold, the classic safe haven asset, was recently up more than 6%. 

Why This Is Important

The consensus on Wall Street is that 2026 will be a solid, if unremarkable, year for the stock market, but analysts warn investors should expect bouts of volatility amid an uncertain geopolitical and economic landscape.

The major indexes came into Tuesday’s session riding high. The S&P 500 closed a fraction of a percentage point off a record high on Monday, and opened in the green on Tuesday after strong quarterly results from AI darling Palantir (PLTR). But it didn’t take long for the morning’s optimism to fade: The S&P and Nasdaq were both down on the day within a half hour of the open. 

After last year's barrage of unsettling headlines out of Washington, D.C., investors came into 2026 expecting volatility. They got plenty of it last month with President Donald Trump's threats against Federal Reserve independence and some of America's key alliances, which shook Wall Street—though investors took those surprises in stride, rewarding investors who bought the dip.

Unlike those earlier bouts of volatility, Tuesday’s sell-off lacked a clear a trigger. Disappointing earnings reports sent shares of select companies like Gartner (IT) and PayPal (PYPL) sharply lower, but there were no major updates coming from the usual suspects—such as Trump, the federal agencies that publish inflation and labor market data, the Fed or Big Tech firms.

Rather, the slump appeared to be an acceleration of the moves that have characterized markets so far this year. Software stocks have been dogged by concerns that the rise of AI and “vibe coding” will upend the industry. Those shares were hit particularly hard Tuesday, with Intuit (INTU) down more than 11% and Salesforce (CRM) slumping nearly 7%. Some market watchers attributed Tuesday's sell-off to the release by AI startup Anthropic of workplace productivity tools that some investors fear will disrupt the enterprise software and data industries.

The software carnage quickly spilled over into the wider market. The tech giants that have been treading water so far this year also slipped. Chip giants Nvidia (NVDA) and Broadcom (AVGO) each declined about 3%. Most of the Magnificent Seven—Apple (AAPL) and Tesla (TSLA) being the exceptions—shed more than 1%. Tech investors are preparing for big earnings reports from Mag 7 members Alphabet (GOOG) and Amazon (AMZN) in the coming days.

Meanwhile, red hot memory and data storage stocks yet again rose on Tuesday. Shares of Western Digital (WDC) surged 7%, while Sandisk (SNDK), shares of which have nearly tripled in value in the last month, gained more than 4%. 

Amazon is seen reporting record revenue on the back of a strong holiday shopping season and solid cloud growth.

Ying Tang / NurPhoto / Getty Images

Key Takeaways

• Amazon is slated to post fourth-quarter earnings after the closing bell Thursday, with analysts projecting record revenues from the cloud giant.
• Options pricing suggests traders expect Amazon's stock could move up to 7% in either direction in the days following the results.

Amazon is set to report its latest quarterly results after the closing bell Thursday, with traders anticipating a big move in the tech giant's stock that could bring it to new highs following the results.

Options pricing suggests traders expect Amazon (AMZN) stock could move nearly 7% in either direction by the end of the week. A move that size from the stock's recent level around $238 could push the shares above $255, past November's highs—or pull them back below $222.

Why This Matters to Investors

As Amazon and many of its Big Tech peers continue to invest heavily in AI infrastructure, investors will likely be watching closely for updates Thursday on the company's cloud growth and future spending plans.

Last quarter, growth in the company's Amazon Web Services segment helped drive earnings above expectations and Amazon lifted its capital expenditures forecast. Bank of America, Wedbush, and Citi analysts recently wrote that they expect Amazon could top estimates again with its results Thursday, with a boost to its retail operations from a strong holiday shopping season and solid AWS growth as Amazon expands its cloud computing capacity.

Amazon is seen reporting a nearly 13% year-over-year jump in revenue to a record $211.55 billion for the fourth quarter, according to estimates compiled by Visible Alpha. Earnings per share are projected to rise to $1.97 from $1.86 a year ago.

During Amazon's earnings call, executives could face questions about the company's AI spending, as well as its efforts to curb costs elsewhere. Last week, Amazon announced the largest round of layoffs in the company's history, with plans to cut 16,000 jobs after eliminating 14,000 roles in October.

Wall Street analysts are overwhelmingly bullish on Amazon stock, with 21 of the 22 analysts tracked by Visible Alpha calling Amazon a "buy," compared to just one "hold" rating. Their mean price target around $298 would imply more than 25% upside from the stock's recent levels.

Tesla CEO Elon Musk this week said two of his private companies would merge.

Harun Ozalp / Anadolu via Getty Images

Key Takeaways

• The latest deal, announced Monday, reportedly values the combined SpaceX-xAI at $1.25 trillion ahead of a potential mega IPO later this year.
• Musk in a SpaceX blog post said the deal would "accelerate humanity's future."

Earth's richest man wants to build a mega company. Its mission is as ambitious as its reported valuation.

Elon Musk yesterday confirmed earlier reports that his private space exploration company, SpaceX, had acquired xAI, his private artificial intelligence company—the latter which, by the way, owns X, his private social media company. The overarching goal, he said in a blog post, is to put satellites in space to "harness the sun's full power" for AI-driven applications and "accelerate humanity's future."

If the premise of the company seems heady, it's because it is—if the future of AI is constrained by a lack of resources on Earth, Musk proposes, why not build it somewhere else?

In more earthbound terms, meanwhile, the deal values the combined entities at $1.25 trillion, according to a Bloomberg report. The financial implications are big: Musk was already expected to make SpaceX the biggest initial public offering in history this year. The news has also revitalized discussions about space-based data centers—and kicked off fresh speculation that Musk might also bring Tesla (TSLA), the EV maker turned robotics company, into the fold.

WHY THIS MATTERS TO YOU, AND MUSK

A hotly anticipated mega IPO from Musk could land this year at valuations rivaling the U.S.'s largest tech companies. And since Tesla owns some of the pre-IPO company, its valuation could get a boost as well.

Imaginations worldwide—those fascinated by Musk, mega-finance, the next moves in technology, or all three—are fired up by the possibilities. So are bettors on prediction markets, though shares of Tesla and SpaceX rival EchoStar (SATS) don't appear to reflect the the volume of Street gossip.

"SpaceX and xAI combine... Tesla next?" Wedbush tech analyst Dan Ives posted on X this morning. "In our view there is a growing chance that Tesla will eventually be merged in some form into SpaceX/xAI over time."(One X user suggested a "clue to watch for": news that Musk acquires former U.S. Steel stock ticker "X" from the NYSE. "I'm guessing Elon Musk would only want the X ticker if he were to merge @Tesla with @SpaceX/@xai," they wrote.)

The "SpaceXLounge" Reddit thread in the last 24 hours has lit up too, with one user posting: "Wonder if they are gonna go for tesla next lol."

Musk has shut down such rumors before. In July, when an X user tried to poll Tesla investors on their support of a merger between it and xAI, Musk responded simply: "No." But the latest news, along with last week's revelation that Tesla is now an investor in xAI, has reinvigorated the speculation.

The probability of a "Tesla-SpaceX merger announced before June 30," per a Polymarket contract, has risen to 24% from the mid-teens polled before yesterday's news was confirmed. The SpaceX-xAI deal has also given way to other notions: Traders recently recently placed an 88% probability on it becoming the largest IPO by market cap this year.

Bank of America Says AI Companies Need to Show 'Real Results'

Palantir easily topped earnings estimates, sending shares sharply higher on Tuesday.

Laurent Hou / Hans Lucas / AFP via Getty Images

Key Takeaways

• Palantir shares surged Tuesday, dodging a software stock sell-off after the data analytics company handily topped earnings estimates.
• Palantir has shown Wall Street the benefit of its AI expertise, with commercial revenues doubling year-over-year as companies across industries working with the company to embed AI in their processes.
• Software stocks have slumped this year amid concerns that AI will enable companies and consumers to create their own bespoke software, rather than rely on third parties.

Yet again, investors are showing that they have plenty of love left for companies that are seeing real results from the AI boom. 

Palantir (PLTR) stock was up more than 5% in recent trading, after the data analytics software company blew past earnings estimates, results that Citigroup analysts attributed to its “best-in-class” AI capabilities. Palantir was leading advancers in the Nasdaq 100, which is down sharply Tuesday amid a broad decline for technology stocks. (You can read Investopedia's coverage of today's market action here.)

Palantir and its peers in the software industry have had a tough start to the year on Wall Street, with the rise of “vibe coding” stoking concerns about AI-driven disruption. Palantir stock fell nearly 17% between the start of the year and Monday’s close, while the iShares Expanded Tech-Software Sector ETF (IGV) fell more than 15%. 

Tuesday’s results helped reassure investors that AI is more of an opportunity than a threat to Palantir. The results were “a warning to peers” that “being an ‘AI company’ needs to come with real results,” wrote Bank of America analysts in a note on Tuesday. 

Why This Is Important

Palantir and other software stocks fell on hard times in recent months as investors assessed how AI could upend the industry. Palantir's results on Tuesday, however, demonstrated there's hope for software companies that can show investors how AI is fueling sales or earnings growth.

While Palantir’s quarterly results boosted its shares on Tuesday, the optimism did not extend to the broader software space. Shares of software giants Intuit (INTU), ServiceNow (NOW), Adobe (ADBE), Workday (WDAY) and Atlassian (TEAM) were all down more than 7% in recent trading, dragging the IGV ETF down more than 5%.

Investors are increasingly demanding evidence from tech companies that the AI boom is translating into top- and bottom-line growth. A supply crunch has boosted margins at memory and data storage device maker’s Sandisk (SNDK), Western Digital (WDC) and Micron (MU), making them the hottest stocks on Wall Street in recent months. Shares of Meta Platforms (META) soared last week when the company said its AI products were fueling faster revenue growth, while Microsoft (MSFT) stock plummeted after its key AI metric, cloud revenue growth, fell short of estimates. 

Bank of America analysts hailed Palantir’s “Rule of 40” score—a performance metric that sums a company’s revenue and profit growth rates—of 127% in the most recent quarter as evidence of its unique position within the software sector. Palantir, which has no direct exposure to the hundreds of billions being spent annually on data center equipment, is one of only four companies tracked by BofA with a Rule of 40 score above 80—the others being major data center chip suppliers Nvidia (NVDA), Taiwan Semiconductor Manufacturing Co. (TSM) and Micron.

Instead of benefiting from spending on AI infrastructure, Palantir has made itself a key partner to companies implementing AI internally. Palantir's commercial revenue—as opposed to government revenue—grew 137% year-over-year last quarter, and is forecast to increase 115% this calendar year. According to BofA, the number of companies mentioning Palantir on their third-quarter earnings calls more than doubled from the prior year.

While AI has been a headwind for software stocks recently, some experts say it's only a matter of time before Wall Street realizes software companies industry-specific knowledge and relationships are, like Palantir, indispensable enablers of AI implementation.