Chip stocks hit a record high since 2000, while SaaS stocks plunged to a new year-to-date low: Two worlds divided by AI
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Chip stocks hit a record high since 2000, while SaaS stocks plunged to a new year-to-date low: Two worlds divided by AI
The market is drawing a line with real money: below this dividing line, AI infrastructure wins, while AI upper-layer applications lose.
Navigating Web3 tides with focused insightsAuthor: Ada, TechFlow
On April 23, Texas Instruments’ stock posted its best single-day performance since 2000. On the same day, ServiceNow recorded its largest single-day decline in history.
Same earnings season. Same trading day. Opposite signals. The market—backed by real money—is drawing a line. Below this dividing line: AI infrastructure wins; AI upper-layer applications lose.
Chipmakers are smiling; subscription sellers are crying
On Thursday, Texas Instruments delivered an almost flawless quarterly report. Q1 revenue hit $4.83 billion, up 19% year-on-year; EPS reached $1.68—far exceeding the consensus estimate of $1.40. Data center revenue surged 90% year-on-year. Industrial and analog chip businesses saw broad-based recovery.
The stock rose 18% that day. Bank of America upgraded its rating from Neutral to Buy and raised its price target from $235 to $320.
Its guidance for Q2 revenue stood at $5.0–$5.4 billion—its midpoint over 10% above Wall Street’s expectation. Management stated that the recovery in industrial and data center demand is “accelerating.”
After hours, Intel dropped another bombshell: Q1 revenue totaled $13.58 billion—well above the expected $12.42 billion. Non-GAAP EPS came in at $0.29, versus a market expectation of just $0.01—a staggering 29-fold beat. Data center revenue grew 22% to $5.1 billion.
Intel’s stock surged over 20% after hours, breaching its all-time high set during the 2000 dot-com bubble. After the U.S. government invested $10 billion last year, the stock has already risen over 80% this year.
This semiconductor boom rests on one foundational logic: AI isn’t air—it consumes electricity, requires chips, and occupies data centers. From NVIDIA’s GPUs to Texas Instruments’ analog chips, and from Intel’s CPUs to advanced packaging solutions, every link in the AI infrastructure supply chain is being shouted at to “get on board.”
The Semiconductor ETF (SMH) is up nearly 28% year-to-date—and jumped 22% alone in April. Over the same period, the S&P 500 rose just 4%.
On the flip side, the software sector is undergoing a bloodbath.
ServiceNow plunged 18%—its worst-ever single-day drop. IBM fell nearly 10%. Then contagion spread rapidly: Salesforce, Workday, Oracle, Adobe, and Palantir all tumbled sharply. The iShares Expanded Tech Software ETF (IGV) dropped nearly 5% that day.
The irony? Neither IBM nor ServiceNow delivered bad earnings. IBM’s revenue beat expectations; so did ServiceNow’s. Yet the market didn’t care. It was pricing in a deeper fear: Your moat is being eroded by AI.
The SaaSpocalypse
This didn’t happen overnight.
Over recent months, a new term has swept through tech, venture capital, and public markets: “SaaSpocalypse”—the SaaS apocalypse. Since February, the software stock rout has been relentless. So far, roughly $2 trillion in enterprise software market value has evaporated.
Salesforce is down over 30% year-to-date. Workday is down 33%. Adobe is down 27%. Even Microsoft has fallen 16%. The Software ETF (IGV) has plunged from its all-time high of $117 to around $82—entering technical bear-market territory. The forward P/E ratio for the software sector has dipped below the S&P 500’s overall level—the first time since the mid-2010s.
Why?
The core logic boils down to one sentence: AI enables enterprises to do it themselves.
The traditional SaaS business model charges per seat: if you have 100 employees using my software, you buy 100 licenses. But with AI agents, one agent can replace the work of 10 employees—fewer seats means lower subscription fees.
Even more damaging: some enterprises are now building internal tools directly with AI, bypassing the SaaS middle layer entirely. Previously, buying a CRM system cost $300 per employee per month; today, an AI-built internal system may cost only one-tenth as much.
In other words, SaaS moats used to rest on high switching costs and user stickiness. AI short-circuits both. Switching costs fall because AI automates data migration; stickiness weakens because users no longer need to learn new tools.
A shift in narrative
Consider two data points.
Year-to-date, the semiconductor index is up ~40%; the software index is down over 13%. The gap between them exceeds 50 percentage points.
What does this mean? Capital hasn’t exited the tech sector—it’s executed a precise pivot *within* tech: from the application layer to the infrastructure layer.
The logic is simple now: If I want to bet on AI, I buy chips—because regardless of which AI wins, chips will be needed. But I don’t necessarily buy SaaS.
That’s the market’s harsh reality. Chips represent a deterministic bet: no matter how AI evolves, compute demand will only grow. Software, by contrast, represents a conditional bet—one that only pays off if AI cannot fully replace software *and* if software companies successfully transform. Both conditions are uncertain—and capital hates uncertainty.
Still, attributing ServiceNow’s and IBM’s declines entirely to AI threats isn’t entirely fair.
ServiceNow CFO Gina Mastantuono cited a concrete reason on the earnings call: geopolitical tensions in the Middle East delayed orders. Customers in Iran placed new orders—but those deals slipped into future quarters, dragging down current-quarter subscription revenue.
IBM also offered specific explanations. Its software business growth slowed from 14% last quarter to 11.3%—mainly due to drag from Red Hat’s cloud business. Overall revenue growth decelerated from 12.2% to 9%. IBM maintained its full-year guidance unchanged—no upward revision.
Yet the market ignored these details entirely.
In an environment where everyone fears “software is dying,” any less-than-perfect report gets interpreted as “See? It’s starting.” Once such sentiment takes hold, data becomes irrelevant—narrative rules.
And today’s narrative is clear: AI is the apex predator at the top of the food chain; SaaS is prey at the bottom.
Beneath the surge
Texas Instruments’ 18% rally hides an unflattering number: its P/E ratio exceeds 50x. Over the past three months, insiders sold $26.5 million worth of stock—and bought zero shares.
Intel’s forward P/E stands at 120x—more than four times the S&P 500’s. One valuation firm estimates its intrinsic value at $27, while its share price trades near $67—a 147% premium.
Evidently, current chip valuations have already priced in three years’ worth of growth. Buyers aren’t betting on this quarter’s results—they’re betting on unwavering faith in sustained AI capital expenditure.
This year, the four largest tech giants plan combined AI capex exceeding $500 billion. Google alone plans to spend $180 billion. As long as this capex cycle continues, chip stocks remain supported. But what if one of these giants suddenly concludes that the ROI on burning cash isn’t high enough?
Recall Alphabet’s last $180 billion capex announcement—its stock plunged 6% after hours. The market’s message was clear: “We know you’re building AI—but we’re starting to worry whether you’ll ever score.”
Zooming out, the earnings divergence on April 23 reveals a broader structural shift.
AI’s value capture is migrating downward—from subscription fees at the software layer, down to chip fees, energy costs, and data center fees at the hardware layer. The entire tech industry’s profit-allocation map is being redrawn.
When chipmakers’ stocks hit records unseen since 2000—and subscription sellers crash to year-to-date lows—the market is saying just one thing: “I know AI is real, so I’ll buy infrastructure. But whether AI actually delivers? I’m still not sure—so I won’t buy applications.”
How long will this split last? No one knows. A useful reference point is the next earnings season. If tech giants continue ramping up AI capex, chip cash flows will sustain valuations. But if even one major player hits the brakes, this divide could reverse.
Until then, the chipmakers’ victory party continues—and the SaaS funeral marches on.
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