(Bloomberg) -- Investors need more patience for the euphoria about artificial intelligence to lift the stocks of software makers.

At a time when surging demand for AI infrastructure are spurring traders to bid up hardware manufacturers such as Dell Technologies Inc. and Micron Technology Inc., software companies are having trouble convincing the market that similar growth is on the horizon. 

The Philadelphia Stock Exchange Semiconductor Index has climbed 16% this year, supported by makers of chips and servers such as Nvidia Corp. and others tethered to AI. Meanwhile, an index of software stocks whose members include Adobe Inc. and Salesforce Inc. has gained less than 4% so far this year. 

The software index fell 1.1% on Wednesday, while the chip index fell 0.9%.

“We’re not seeing tangible lifts to earnings,” said Scott Yuschak, managing director of equity strategy Truist Advisory Services. “A lot of companies talk about utilizing and benefiting from AI, but we still need to see use cases and how willing their customers will be to pay. That clarity may not come until next year.”

While expectations are that artificial intelligence will reshape entire economies, such hopes are yet to be borne out in fundamentals.

Adobe, for example, dashed expectations about a lift from generative AI for its creative-arts software in a weak sales forecast last month, with its shares slumping more than 20% from this year’s high. 

Salesforce, which is investing in AI-based features to help spark sales of its customer relations management software, also gave a lackluster outlook when it reported earnings in February.

Even Alphabet Inc. has struggled with offerings that have been dogged by accuracy issues and internal criticism about the usefulness of its AI tools. 

Revenue contribution from AI remains minimal even though customers are interested in the technology, wrote Brian White, an analyst at Monness Crespi Hardt & Co. Markets “will grow increasingly suspicious of generative AI propaganda,” he said.

On the whole, software firms are expected to achieve less than half the earnings growth of semiconductor peers in 2024, according to Bloomberg Intelligence. The past earnings season also showed that they’re more likely to miss consensus when compared to their hardware counterparts, according to data compiled by Bloomberg.

“Near-term expectations of generative AI may be outpacing fundamentals,” wrote Tyler Radke, an analyst at Citigroup Inc. While AI remains a focus for software executives, “project sizes and use cases remain smaller in nature rather than large-scale transformation changes.”

Waiting Game

Still, while AI may not yet be showing up in results, investors view a looming impact as a matter of time. 

Take Adobe. While its forecast may have been disappointing, recent product announcements underlined its competitive position. For Alphabet, talks with Apple Inc. to use the Google-parent’s AI model in its iPhone lineup is viewed as a win for both. 

Microsoft Corp is already pointing to the technology as a driver of growth, with efforts to bake AI into a variety of marquee products including Azure, Office and Windows starting to pay off.

“Every company realizes there is great potential here, so they are building applications and doing trials,” said Jonathan Curtis, chief investment officer for Franklin Equity Group. “The impact is absolutely coming, and being concerned that we haven’t seen it yet is way too short-term a view.”

Tech Chart of the Day

The Nasdaq 100 Index fell 0.9% on Tuesday, sinking in a broad-based decline amid speculation over when interest rates will be cut. Just 15 components of the tech-heavy index rose, making for one of the weakest days of the year by this measure, as well as the lowest number of advancers since mid-February.

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--With assistance from Subrat Patnaik.

(Updates to market open.)

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