AI and software stocks are now rising together. The 1-month correlation between AI-related stocks and software stocks has risen +0.70 over the last month, to +0.15, marking its largest monthly increase since July 2025. By comparison, the 1-month correlation was as low as -0.56 in July 2026, as investors increasingly viewed AI as a threat to traditional software businesses. As a result, hedge fund exposure to software and services stocks declined -5 percentage points over the 12 months ending July, to just ~1% of total global hedge fund market exposure, near its lowest level on record. The recent increase in correlation comes as some software firms previously viewed as vulnerable to AI are actually finding ways to use the technology to strengthen their existing businesses, improve productivity, and defend their competitive advantages. Meanwhile, the US software ETF, IGV, is up +39% since its April low, recovering most of its drawdown that began in October 2025. The AI trade may be shifting from disruption to adaptation.