Software looks like it’s in danger of disruption and hardware stocks look expensive. So are there still any opportunities?

Background: the AI dilemma

AI has been reshaping the way investors think about tech stocks in 2026. Despite decent earnings, software stocks have been selling off. 

ServiceNow is a good example. CEO Bill McDermott says annual recurring revenues are set to hit at least $30bn by 2030. 

If that happens, $106bn market value looks pretty cheap. But investors don’t seem to believe it and the stock is down 30% since January.

On the other side, anything connected with building data centres has been surging. Micron, for example, is up 132% since the start of the year. 

No doubt the business has been doing well. But a lot of the increase is the result of the stock now trading at higher multiples.

In general, I think it’s hard to see opportunities in either camp right now. There are, however, a few exceptions. 

Inelastic demand

The stocks that have really taken off have been the ones where supply is limited. Specifically, ones with only a couple of operators. 

Memory – the industry Micron is in – has exactly this feature. The firm has Samsung and SK Hynix for company, but that’s about it.

The fancy name for this is ‘inelastic supply’. Essentially, it means supply doesn’t react quickly to changes in demand. 

That means prices move sharply when demand increases. And it also means the companies involved make a lot more money. 

Obviously, the reverse is also true. But this is a big part of why rising demand for chips has caused such sharp movements.

Memory is one area where supply is limited and inelastic. There is, however, another that’s worth looking closely at. 

Chip design

Synopsys (NASDAQ:SNPS) is a software business. And while its share price hasn’t crashed, it’s gone almost nowhere this year. 

Unlike other software companies, though, it’s involved in the growth of data centres. It makes software for chip designers. 

Right now, Alphabet, Amazon, and others are trying to move away from Nvidia GPUs. But that involves designing their own chips.

To do that, they need electronic design automation (EDA) software. And that means either Synopsys or Cadence Design Systems.

Analysts are anticipating steady earnings growth of just under 12% for 2026. But this is expected to pick up sharply in the next few years.

This isn’t the kind of growth that Micron has been posting recently. It is, however, a notable acceleration from previous years.

What should investors do?

The big worry with semiconductor equipment stocks right now is that data centre spending might slow down. If that happens, things could get ugly.

Is that a risk for Synopsys? It might be – less building might weigh on chips, which could slow demand for design software. 

The share price also hasn’t crashed like a lot of other software names. It’s trading at a forward price-to-earnings (P/E) ratio of 34.

Despite this, I think the stock could be worth a look. For investors looking to catch the AI wave, it might not be too late…

Should you invest £5,000 in Synopsys right now?

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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Synopsys made the list?

Stephen Wright owns shares in Amazon.

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