The US technology sector rebounded in April after a weak first quarter in 2025. Hardware and semiconductors were strong, while software lagged. The sector outperformed the market by over 800 basis points in the past year. Secular tailwinds like cloud computing and artificial intelligence drive confidence, with software offering the most upside.

Generative AI is the dominant theme in the sector, with software firms integrating advanced AI capabilities. Cloud providers are scaling capacity, and semiconductor companies like Nvidia see surging demand. Many AI stocks fluctuated in value throughout 2025.

The Morningstar US Technology Index rose by 21.43% in the past 12 months, outperforming the US equity market. Tech stocks remained stable in the last quarter. Hardware and semiconductors are fairly valued, while software is undervalued. The median US tech stock offers an attractive margin of safety.

Quantum computing is an emerging field with potential annual market value of $200 billion. Quantum computers may be integrated into existing cloud services. Broadcom and Microsoft are top picks in semiconductors and software, respectively. NXP Semiconductors is expected to benefit from improving automotive demand and diversification in auto products.

Read more at Morningstar: US Technology Stock Outlook: Secular Tailwinds Continue