Nuveen CIO: Software Shares Set to Bounce Back After AI-Driven 2026 Decline

Over most of 2026, software equities underperformed the wider market, despite concerns that AI would undermine their fundamentals proving largely unfounded.

Saira Malik, chief investment officer at Nuveen, contends that the sector's profit figures paint a contrasting picture to its share performance, and a recovery might be more imminent than the market movements imply. Her remarks came the day following Nvidia's results, which allayed concerns over AI expenditure, and just ahead of a busy week of tech earnings featuring Workday, Autodesk, and Marvell.

Why Software Stocks Got Punished for No Reason

According to Malik, throughout 2026, investors were preoccupied with the notion that generative AI would decimate staffing levels and income expansion at software firms, a worry that afflicted the industry extensively and without distinction.

She maintained that the data never supported the alarm.

“When you separate the signal from the noise, it didn’t show up in software companies fundamentals. Revenue growth rates for software companies remained fairly stable.”

Saira Malik, Bloomberg

Profit margins and earnings also remained solid, she noted, and the anticipated surge in layoffs across the industry, which many believed AI would cause, has not occurred to the extent that was feared.

Real Names, Real Declines

This week, Workday surpassed second-quarter revenue and profit expectations. Despite this, its stock initially fell, only to rebound sharply in after-hours trading.

Autodesk declined about 5% in post-market trading even after it upped its full-year revenue projection. The market's attention was on a reduced free cash flow prediction linked to a recent purchase.

This year, Adobe and Workday have received wary assessments from certain Wall Street analysts, who have highlighted decelerating expansion and shifts in business models as significant threats to both equities.

Marvell Is the Next Signal to Watch

Marvell's earnings, scheduled for release after Thursday's market close, would indicate if the AI-driven rally is spreading from Nvidia to the wider semiconductor and software landscape, according to Malik. She stated that a positive outcome would validate the upturn set in motion by Nvidia's results this week, in which the chip manufacturer raised its fiscal 2027 revenue growth forecast to 70%, markedly exceeding the approximately 45% that analysts had anticipated.

Marvell subsequently surpassed expectations on both revenue and earnings, but its share price edged down as market participants balanced tightening margins against the growth.

Yields on long-term Treasury bonds exceeding 5% and a Friday speech by Federal Reserve Chair Kevin Warsh at Jackson Hole continue to be uncertain factors for equity trading in the near term. However, Nuveen's perspective is that software profits, rather than stock valuations, are currently providing the truer narrative.