The stock market kicked off 2026 with the S&P 500 at its second-highest valuation in 155 years, yet opportunities abound for discerning investors. Notably, while the S&P 500 is just 2% shy of its all-time high, the iShares Expanded Tech-Software Sector ETF is lagging significantly, down 37%. This discrepancy highlights potential value in software stocks, particularly Adobe and Microsoft, which have seen their shares decline amid AI-related fears.
Despite concerns over AI diminishing demand for high-margin software, both companies are demonstrating resilience. Adobe’s annual recurring revenue surged over 300% year-over-year, and its subscription revenue grew by 13%. Meanwhile, Microsoft reported a 15% sales growth, driven by its cloud computing and AI segments. Both companies are also employing robust capital-return strategies, with Adobe’s forward P/E at its lowest in over a decade and Microsoft’s shares trading 34% below their historical average.
Investors should consider these software giants as compelling opportunities, especially given their strong operational performance and strategic positioning in a rapidly evolving tech landscape.
Source: fool.com