Winners and Losers Among Stock Funds During Q2 2026

Markets were volatile in the first half of 2026. After falling 4.2% in the first quarter, the Morningstar US Market Index recovered in the second quarter, climbing 15.5%.

The rapid adoption of artificial intelligence has created a sharp divide in equity markets. Companies supplying the infrastructure that powers AI have generally outperformed, while many software companies have faced greater scrutiny over disruption to their business models. That divergence shaped sector returns and fund manager performance.

While the broader market recovered, not every corner of the market shared in the gains. The following sections unpack the winners and losers for the second quarter.

Hardware Is Winning the AI Race

Technology staged one of the strongest rebounds of any equity sector in the second quarter of 2026. Indeed, the technology category rose 39.9% during the quarter after falling 5.1% in the first quarter. Those gains were far from evenly distributed: The Morningstar US Semiconductors Index surged 47.3%, while the Morningstar US Software Index rose just 7.2%. Chipmakers, memory producers, and equipment suppliers such as Nvidia NVDA, Broadcom AVGO, and Micron Technology MU benefited as hyperscalers kept ramping AI data center spending.

		A Tale of Two Industries
	



		Semiconductors outperformed software in 2026’s second quarter.

Source: Morningstar Direct. Data as of June 30, 2026. Download CSV.

While software continued to lag semiconductors in the second quarter, there were some signs of life. For much of the past year, investors have been concerned about potential disruption to software companies’ business models. That caused a sharp selloff for names like Salesforce CRM, ServiceNow NOW, Adobe ADBE, and Snowflake SNOW. Even Microsoft MSFT fell sharply. But the software index has bounced off its April 2026 lows, ending the second quarter modestly higher, though still significantly trailing semiconductors.

		Software’s Hard Fall
	



		Morningstar US Software Index total return, July 2025–June 2026.

Source: Morningstar Direct. Data as of June 30, 2026. Download CSV.

The split showed up among active managers, too. Akre Focus ETF AKRE, which held roughly 40% of its portfolio in software names, finished near the bottom of the large-growth Morningstar Category as holdings such as CCC Intelligent Solutions CCC and Salesforce each fell more than 10%. AB Disruptors ETF FWD, with about one-third of assets in semiconductor and semiconductor equipment companies, gained 37.4% and finished at the top of the global large-stock growth Morningstar Category.

Remember Emerging Markets?

The AI infrastructure boom wasn’t limited to the United States. The Morningstar Global Semiconductors Index surged 58.8%, as many of the world’s largest semiconductor makers are based in Asia, and investors rewarded those markets accordingly: The diversified emerging-market category returned 20.8% in the second quarter, while the Pacific Asia ex-Japan category gained 23.3%. For comparison, the typical US large-growth fund and US large-blend fund gained 18.7% and 14.1% during the period.

Much of that strength traced back to companies at the center of the AI supply chain. Taiwan Semiconductor Manufacturing TSM benefited from surging AI chip demand, while Korea-based SK Hynix 000660 and Samsung Electronics 005930 rallied on their leadership in high-bandwidth memory, a key input for AI accelerators.

		Asia's Chipmakers Standout Quarter
	



		Despite facing headwinds in early June, Asian AI enablers finished the quarter strong.

Source: Morningstar Direct. Data as of June 30, 2026. Download CSV.

Active managers concentrated in these markets delivered standout results. AMG Veritas Asia Pacific MSEIX returned 36.9%, helped by an over 30% combined exposure to TSMC, Samsung Electronics, and SK Hynix. Within the broader diversified emerging-market category, BlackRock Emerging Markets ex-China MAECX and T. Rowe Price Emerging Markets Stock PRZIX placed near the top of their peer group.

The Energy Rally Meets Gravity

The second quarter also showed how quickly market leadership can change. After leading all equity categories in the first quarter with a 31.0% return, equity energy fell to the bottom of the rankings, losing 7.1% in the second quarter. Only the equity precious metals category performed worse.

Energy’s reversal tracked a fast-moving macro backdrop; early-quarter geopolitical tensions in the Middle East pushed oil prices higher, but as those fears eased, oil and energy stocks both retreated.

Several managers had leaned into energy, expecting the rally to continue. Invesco Small Cap Value VSMIX, TCW Transform Systems ETF PRWD, and Alger Mid Cap Focus AFOZX all increased their exposure, and holdings such as APA APA, Crescent Energy CRGY, and Kosmos Energy KOS each fell more than 20% during the quarter. Yet these funds overcame their disappointing energy bets via heavy technology and momentum exposure, and each placed in the top quartile of their respective categories. TCW Transform Systems returned 26.2% (large blend), Alger Mid Cap Focus gained 25.6% (mid-growth), and Invesco Small Cap Value returned 22.7% (small value).

Small Caps Finally Get Their Turn

Small-cap stocks, which had lagged their larger peers for much of the past year, staged a notable comeback in the second quarter. The small growth category saw the most dramatic shift, swinging from a 2.1% loss in the first quarter to a 24.3% gain in the second. The rebound was driven largely by the AI rally broadening beyond mega-cap technology.

There were several standout performers within the small-growth category. Lord Abbett Developing Growth LADYX gained 39.0%, and Columbia Small Cap Growth CMSCX rose 35.5%, both landing in the category’s top decile. Technology holdings such as Credo Technology Group CRDO and Semtech SMTC more than doubled during the quarter. Meanwhile, American Beacon Small Cap Value ABSAX gained 19.0%, finishing at the top quartile of the small value category.

The rebound was a reminder that leadership can rotate quickly—a theme that defined the quarter, from semiconductors to energy to small caps alike.

		It Was the Best of Times, It Was the Worst of Times
	



		Technology and small cap growth rebounded sharply in the second quarter of 2026 while energy gave back its first-quarter gains.

Source: Morningstar Direct. Data as of June 30, 2026. Download CSV.