Meet the Spectacular ETF With Big Positions in Stocks Like Palantir, Microsoft, and Salesforce. It Could be a Brilliant Buy as the AI Trade Unwinds.

Written by Anthony Di Pizio for The Motley Fool->

Top suppliers of AI chips like Nvidia and Micron have plummeted in value over the last few weeks.

Investors who are concerned AI will displace legacy software companies might wish to reconsider their thesis.

The iShares Expanded Tech-Software ETF could be a great buy while it's still trading at a discount.

The iShares Expanded Tech-Software ETF (NYSEMKT: IGV) is an exchange-traded fund (ETF) that holds over 100 different software stocks, including industry leaders like Palantir Technologies, Microsoft, and Salesforce. The ETF has suffered a decline of 11% this year amid concerns that artificial intelligence (AI) could disrupt the legacy software-as-a-service (SaaS) business model.

The potential risks are twofold. First, some investors think AI will shrink the global workforce, thus reducing the revenue of SaaS companies that charge customers on a per-user basis. Second, some investors fear AI-powered programming tools like Claude Code will allow businesses to create their own versions of popular software products, rendering legacy vendors obsolete.

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But the AI boom has recently run into trouble. Wall Street is questioning the sustainability of the data center infrastructure spending boom because the sheer cost of chips and other components is making AI models too expensive to deploy at scale in many cases. Here's why that could be good news for the iShares Expanded Tech-Software ETF.

Some of America's top suppliers of AI data center chips have lost a substantial amount of value over the last few weeks. Nvidia stock is down 16% from its high, while Advanced Micro Devices stock has declined 21%, and Micron Technology stock has plummeted 33%.

The soaring cost of chips and components has forced AI providers like Anthropic to implement passive price increases on their customers, many of which are now rethinking their spending. Uber Technologies recently blew through its entire 2026 AI budget in four months by using Anthropic's Claude Code, and its chief operating officer said it's becoming harder to justify the current level of spending.

But Uber isn't alone. Investment bank UBS Group recently conducted a survey that found 60% of businesses were routing tasks to cheaper, more efficient AI models to keep costs under control. Amazon and Walmart have even placed caps on AI usage for their employees to prevent budget blowouts.

And in a big, unexpected twist, a July 26 report by The Wall Street Journal suggested that large American companies have started hiring more human employees again, bucking predictions of an AI wipeout of the workforce. Simply put, it appears the AI wave that initially threatened the software industry is quickly losing momentum.

Despite holding 107 different stocks, the top 10 positions in the iShares Expanded Tech-Software ETF account for more than half the value of its entire portfolio. But they include many of the leaders in industry sub-segments like cybersecurity, enterprise software, and system infrastructure.

Data source: iShares. Portfolio weightings are accurate as of July 27, 2026 and are subject to change.

Palo Alto Networks and CrowdStrike are two of the world's largest cybersecurity companies. Despite the sell-off in the broader software industry, these two stocks have soared by more than 50% this year. AI is creating new attack surfaces for hackers to exploit, so enterprises are racing to secure their networks with advanced protection.

Palantir stock isn't faring so well, with a 26% year-to-date loss. Demand continues to surge for its portfolio of AI-powered software platforms, which help businesses and government organizations extract maximum value from their internal data, enabling more informed decision-making. However, its stock was trading at a sky-high valuation which simply wasn't sustainable; hence, the recent sell-off.

Salesforce's 27% year-to-date decline is more related to fears of AI-driven displacement. However, the company's customer relationship management software is a staple in over 150,000 enterprises worldwide, and it has a growing list of AI features which will reduce the need for customers to seek alternative solutions as the technological landscape shifts.

Outside of its top 10 positions, the iShares ETF holds a number of other software stocks that have suffered an AI-related beating. They include Intuit, Atlassian, Workday, and HubSpot. Ironically, these could be the very stocks that fuel a recovery in the iShares ETF if the turbulence in the AI industry continues.

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Anthony Di Pizio has positions in Atlassian. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Amazon, Atlassian, CrowdStrike, Fortinet, HubSpot, Intuit, Micron Technology, Microsoft, Nvidia, Oracle, Palantir Technologies, Salesforce, ServiceNow, Uber Technologies, Walmart, and Workday. The Motley Fool recommends Palo Alto Networks and recommends the following options: long January 2028 $330 calls on Adobe and short January 2028 $340 calls on Adobe. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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