Since April 2025, I’ve consistently opined about information technology, which remains a bright spot on the US economic landscape. Despite the tactical underperformance of the S&P 500 Information Technology sector from October 2025 to March 2026, I’ve maintained my long-held structural belief that tech companies have important roles to play. Specifically, technology itself should enable a broader stock market through increased efficiency, faster productivity and wider profit margins.
Despite bubble concerns, I still think that tech stocks are supported by tech fundamentals:
- According to the Census Bureau, manufacturers’ new orders for information technology accelerated 10.5% year-over-year (Y/Y) in March 2026, meaning the demand for computers and electronic products has grown at a double-digit pace.
- According to World Semiconductor Trade Statistics (WSTS), worldwide semiconductor billings or revenues grew at a record-breaking pace of 88% Y/Y in March 2026 (see the chart below)!
- NVIDIA Corp. (NVDA) – the most valuable company on the planet with a market capitalization of over $5 trillion – delivered blowout performance in the first quarter with a $0.10 earnings per share (EPS) beat, a monstrous 131% Y/Y gain in EPS and revenues that soared 85% Y/Y to $81.62 billion. Moreover, management’s forward guidance of $91 billion beat Wall Street’s revenue estimates of $87.36 billion for the second quarter!
Global semi sales have grown 88% Y/Y, the fastest pace ever!
Sources: WSTS, WCG, 5/20/26. Notes: NBER = National Bureau of Economic Research. WSTS = World Semiconductor Trade Statistics. MMA = Month moving average.
Everybody loves semiconductor companies, including us. Indeed, the surge in tech, semi and momentum stocks since March 2026 has ratified our optimistic outlook. As such, the forward-looking growth investor in me is emboldened by those stellar results (see the charts below).
That said, the prudent risk manager in me recommends trimming positions and protecting gains at this stage. Meanwhile, the contrarian value investor in me discourages overlooking the lagging areas of the stock market that could benefit from another “catchup” phase, including software and low volatility stocks.
Psychologists and neuroscientists consider such “self-directed speech” a sign of a functional, active brain :) In my view, those “inner voices” are simply manifestations of a multi-dimensional, cross-disciplinarian process that considers many different investment styles and objectives at the same time.
Sectors: An Old Economy Revival
As discussed last week, I still believe the tech sector should pull the rest of the stock market along for the ride across the style, size and sector spectrums. Indeed, my “tech enablement” thesis is evolving in real-time: Massive capital expenditure (capex) on artificial intelligence (AI) and cloud infrastructure has created “ripple” effects across other areas of the stock market and economy. For example, the S&P 500 Industrials, Materials and Utilities sectors are direct beneficiaries of the data center buildout, energy grid modernization and supply chain optimization. Tech-adjacent companies in those old-economy sectors are managing overhead, improving operational leverage and expanding margins.
Tech should pull the rest of the stock market along for the ride
Sources: S&P Global, YCharts, WCG, 5/18/26. Notes: Indices are unmanaged and cannot be invested in directly. Past performance does not guarantee future results.
Industries & Factors: Mo F’Sho
All industries and factors are not created equal.
- Leaders: The S&P 500 Semiconductors & Semiconductor Equipment industry and the S&P 500 Momentum Index (which focuses on stocks with the fastest price momentum) have had truly historic runs (see the surrounding charts).
- Laggards: By contrast, the S&P 500 Software & Services industry (which has been quietly “basing” since 1Q26) and the S&P 500 Low Volatility Index (which focuses on stock prices with the lowest standard deviations over the last 12 months) have been left in the wake of the semi frenzy.
It’s no coincidence that the outperformance of semiconductors versus software tracks the outperformance of momentum versus low volatility. The information technology sector represents almost 50% of the S&P 500 Momentum Index. Furthermore, Nvidia Corp. (NVDA), Broadcom, Inc. (AVGO), Micron Technology, Inc. (MU) and Advanced Micro Devices (AMD) are among that index’s top 10 constituents by weight. In my humble opinion, it’s reasonable to expect a period of consolidation in semi and momentum stocks to digest their “exponential” gains before the next move higher.
On the flip side, a window of opportunity could open for mature, stable and profitable software & services companies that’ve been overlooked by investors. True, traditional defensive sectors such as utilities (27%), consumer staples (11%) and health care (7%) dominate the low volatility factor. However, we’re intrigued by Oracle Corp. (ORCL), which has a highly recurring revenue model and deep enterprise entrenchment, as well as Akamai Technologies, Inc. (AKAM), which is a steady, essential service provider with reliable cashflow and a defensive market position.
The momentum trade is crowded in semiconductors
Sources: S&P Global, YCharts, WCG, 5/18/26. Notes: Shaded areas are US recessions. Indices are unmanaged and cannot be invested in directly. Past performance does not guarantee future results.
Software Applications: The Jevons Paradox
In the 19th century, economist William Stanley Jevons observed that technological improvements increasing the efficiency of coal usage didn’t decrease coal consumption. Rather, those enhancements made coal cheaper and more useful, thereby fueling a significant increase in coal demand. The Jevons Paradox applies directly to software today.
AI: Disruptor or Accelerant?
Many investors fear generative AI as an existential threat to legacy software, assuming Large Language Models (LLMs) and other tools will automate routine tasks and destroy industry pricing power. That view misunderstands the economics of technological efficiency, which should make it dramatically cheaper, faster and easier to write code and create new applications. By lowering the cost of production, AI could stoke demand for software solutions across every corner of the economy. AI allows software companies to cut costs and expand profit margins while simultaneously satisfying a wider array of consumer and enterprise needs.
Software Employment: Creative Destruction
In the mid-20th century, economist Joseph Schumpeter described “creative destruction” as the essential capitalist process whereby radical innovation dismantles established systems to make way for new, more dynamic economic growth. In the context of the software labor market, generative AI is the ultimate engine of that destruction: It automates basic, rote coding tasks and simultaneously creates higher-value demand for complex system integration, data security and AI oversight.
According to the Bureau of Labor Statistics (BLS), computing infrastructure providers, data processing, web hosting and related services employment fell by -4,000 or -1% month-over-month (M/M) in April 2026. The same employment category has seen a cumulative decrease of -31,500 jobs or -6% from its peak in August 2023.
However, the BLS projects a cumulative increase of 287,900 jobs or 15% growth (which is much faster than the national average) in the demand for software developers and quality assurance analysts through 2034. Excluding replacement needs, those figures translate to 28,790 net new job openings annually that didn’t exist before the AI and cloud buildout.*
Bottom Line
If AI were to completely displace developers, I doubt the demand outlook for software professionals would be so robust. While AI automates rote coding tasks, it may “parabolically” increase the need for system integration, data pipeline management, security and AI oversight. Ultimately, AI isn’t eliminating software jobs … it’s simply destroying the old coding paradigm to birth a larger, more sophisticated workforce. While the human capital required to build and maintain our future software ecosystem is shifting, the aggregate demand for augmented humans may surpass even my wildest hopes and dreams.
*BLS, Occupational Outlook Handbook: Software Developers, Quality Assurance Analysts, and Testers, August 28, 2025.
Recent and relevant Market Strategy Flashes:
“Tech Enablement:” Why Strong Sales Drive Strong CapEx, May 15, 2026
Our “Four-Banger” Growth Engine Is Humming, May 8, 2026
Doing More With Less: Why S&P 500 Employees Are 3x More Productive Than the Average US Worker, February 6, 2026
Profit Paradox: Why Slow Hiring Boosts the S&P 500, January 16, 2026
Technology itself should enable a broader market, October 24, 2025
AI: The force that could extend and end the cycle, October 8, 2025
Productivity: The silver lining of meagre job growth, October 3, 2025
AI revolution: Boosting productivity, expanding margins, August 8, 2025
From beta grazing to alpha hunting, June 13, 2025
The silver lining of slowing payroll growth, November 5, 2024
Definitions
Artificial intelligence (AI): Technology designed to perform tasks that typically require human intelligence, such as language processing, pattern recognition, prediction, coding, and decision support.
Large language model (LLM): A type of AI model trained on large amounts of text and other data to generate, summarize, classify, translate, and analyze information.
Artificial general intelligence (AGI): A theoretical form of AI that could perform a broad range of intellectual tasks at or above human capability. There is no universally accepted definition or timeline for AGI.
Universal Basic Income (UBI): A policy concept in which individuals receive a recurring cash payment, typically from the government, regardless of employment status or income level.
Gross Domestic Product (GDP): The total value of goods and services produced within an economy over a specific period.
Real GDP: GDP adjusted for inflation.
Productivity: A measure of output produced per unit of input, often measured as output per worker or output per hour worked.
GAAP: Generally Accepted Accounting Principles, the accounting standards used by U.S. public companies for financial reporting.
Data Center revenue: Revenue generated from products and services used in data centers, including computing, networking, and AI infrastructure.
Ex ante / ex post: “Ex ante” means before the fact, while “ex post” means after the fact.
Comparative advantage: An economic concept in which a person, company, or country can produce a good or service at a lower opportunity cost than another.
Labor arbitrage: The practice of locating production or services where labor costs are lower.
Post-scarcity: A theoretical economic condition in which most goods and services become so abundant that scarcity is greatly reduced or eliminated.
Disclosures
This material is for informational and educational purposes only and should not be construed as investment, tax, legal, or accounting advice. It does not constitute a recommendation to buy or sell any security, investment product, sector, asset class, or strategy.
The views expressed are opinions as of the date written and are subject to change without notice. Forward-looking statements, including comments about artificial intelligence, economic growth, productivity, labor displacement, market outcomes, and future investment implications, are inherently uncertain and may not occur as expected.
References to NVIDIA or any other company are for illustrative purposes only and should not be interpreted as a recommendation or endorsement. Individual securities mentioned may or may not be held in client portfolios.
AI-generated outputs may contain errors, omissions, unsupported assumptions, or outdated information. The model comparisons discussed above reflect this specific exercise and should not be interpreted as a comprehensive ranking of AI models or a guarantee of model quality or reliability.
Past performance is not indicative of future results. Economic forecasts, productivity estimates, and market expectations are inherently uncertain and may differ materially from actual outcomes.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment Advice offered through WCG Wealth Advisors, LLC, an SEC Registered Investment Advisor. WCG Wealth Advisors, LLC and The Wealth Consulting Group are separate entities from LPL Financial. Index performance is shown for illustrative purposes only and does not predict or depict the performance of any investment. Past performance does not guarantee future results.
All information in this report is believed to be from reliable sources; however, WCG Wealth Advisors, LLC, makes no representation as to its completeness or accuracy.
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Publication Date: May 22, 2026
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