Since the 2008 financial crisis, retirement savers have benefited from the sustained surge in technology stocks, which have consistently outperformed traditional value allocations. The Nasdaq-100 delivered roughly 17% annualized returns from 2009 through 2025, while the tech-weighted S&P 500 indexes chugged along healthily at 11% annually over that period.

The arrival of AI initially accelerated that trend. Investors and fund managers poured money into mega-cap tech stocks like Microsoft, Google and Meta on the belief that their huge AI capital expenditures will unleash productivity and new business opportunities. Software firms also continued to perform well, driven by the assumption that AI would increase the value of software rather than replace it.

That assumption has not held.

This year investors have aggressively repriced software risk as it becomes clear that AI coding tools like Anthropic’s Claude Cowork and Codex can, with hours or days of prompting, create products that rival what many SaaS firms spent years building. Popular software exchange-traded fund, iShares’ IGV ($10 billion, assets) is down 25% this year. The mega-cap tech stocks have also declined amid broader market pullback over the Iran war and as investors reassess the durability of the AI trade itself. Year to date, shares in the largest tech companies—known as the Magnificent 7—have lost 11% on average.

U.S. retirement portfolios—particularly 401(k)s and target-date funds—have become heavily concentrated in tech after a decade of outperformance, leaving........

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