Top Pros' Top Picks 2/4/26

Market Minute ⏱️ 2/4/26: Software Stocks Suffer AI Shock

Mike Larson | Editor-in-Chief

Stocks are trying to stabilize after a tech-led selloff yesterday. Gold and silver are continuing to bounce back, while crude oil, Bitcoin, Treasuries, and the dollar are mostly flat.

Worries that new Artificial Intelligence (AI) tools would render certain products and services obsolete rocked a broad swath of software and data-provider stocks this week. Shares of everything from Adobe Inc. (ADBE) and Salesforce Inc. (CRM) to Equifax Inc. (EFX) and Thomson Reuters Corp. (TRI) plunged, and the iShares Expanded Tech-Software Sector ETF (IGV) is now down 16.6% in the past year.

What gives? New tools like Anthropic’s Claude model and Cowork assistant are prompting investors to rethink what AI will do to a wide range of companies. That includes firms that produce enterprise software, legal tools, research databases, and other products aimed at corporate users. The selling also spread to Business Development Companies (BDCs) given their lending exposure to the software sector. The VanEck BDC Income ETF (BIZD) is now down 5.1% in 2026.

IGV, TXN, SLAB, LLY, NVO (1-Yr. % Change)

Texas Instruments Inc. (TXN) is bulking up in the semiconductor sector, buying Silicon Laboratories Inc. (SLAB) for $7.5 billion in cash. TI specializes in “analog” chips used in automobiles, factory equipment, and other products. The deal will increase its exposure to markets like battery storage, industrial automation, and smart-home equipment. TI stock is up 28.4% in the past 12 months, while SLAB stock is up 1.3%.

Finally, Eli Lilly & Co. (LLY) continues to pull ahead in the weight loss drug war. The maker of Mounjaro and Zepbound forecast a 27% surge in sales this year, topping analyst expectations. The news came shortly after Ozempic and Wegovy maker Novo Nordisk A/S (NVO) warned that its sales would drop 13% in 2026.

Competition from copycat drugs and government pressure to lower prices is hurting Novo, even as Lilly’s products have years of patent protection ahead. Lilly stock is up 24.7% in the last year while Novo stock is down 37.4%.

Faber: If You’re Just Investing in Big TECH, You’re Missing Out on A World of Opportunity

• Top Picks 2026: Constellation Energy Corp. (CEG)
  👉️ TICKER: CEG
  Constellation Energy Corp. (CEG) is an Artificial Intelligence (AI) infrastructure power play and the largest owner of nuclear power plants in the US. Based on forward earnings expectations, the stock is priced well below high-profile AI stocks, providing an attractive risk/reward profile and thus a more conservative play on AI trends, suggests Carl Delfeld, editor of Cabot Explorer.

• Top Picks 2026: Ares Capital Corp. (ARCC)
  👉️ TICKER: ARCC
  It has been a bumpy few months for Business Development Companies (BDCs), companies that lend money to small private businesses which are passed on to investors as high dividend yields. But I like one of the strongest, as well as one of the oldest and largest, Ares Capital Corp. (ARCC), says Adrian Day, editor of Global Analyst.

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