"Software-mageddon" makes investors cautious but on the lookout for deals

‘Software-mageddon’ Hits Wall Street as AI Fears Drag Tech Stocks; Investors Eye Value Buys

Wall Street’s software stocks are facing heavy selling pressure as growing concerns over artificial intelligence disruption rattle investor confidence, sparking what some market watchers are calling a “Software-mageddon.”

The S&P 500 software and services index has fallen 13% in just the past week, wiping out more than $800 billion in market value. Shares of major companies such as Intuit, ServiceNow and Oracle have led the slide. Since its peak in October, the index is down nearly 25%, even as the broader S&P 500 has remained largely flat.

Investors say the selloff reflects rising anxiety about how AI tools could disrupt traditional software business models, forcing the market to separate likely winners from potential losers.

“The selloff is a manifestation of an awakening to the disruptive power of AI,” said James St. Aubin, chief investment officer at Ocean Park Asset Management. “Perhaps this is an overreaction, but the threat is real and valuations must account for that.”

The sector’s recent performance marks its worst relative three-month stretch since the dot-com crash in the early 2000s, according to analysts.

Concerns were heightened by disappointing earnings from companies like Microsoft and fears over new AI tools such as Anthropic’s Claude model. At the same time, investors have been rotating money out of tech and into traditionally safer sectors like consumer staples, energy and industrials.

Despite the sharp fall, some portfolio managers see opportunity.

“There is some long-term value in these names and they are looking more attractive,” said Jake Seltz of Allspring Global Investments, who has been gradually adding shares of ServiceNow and Monday.com.

Other investors have also started selective buying, saying the stocks appear technically oversold. Walter Todd of Greenwood Capital said his firm recently bought shares of ServiceNow and Microsoft, adding that a complete replacement of existing software by AI solutions is unlikely in the near term.

Still, many remain cautious. Brad Conger of Hirtle, Callaghan & Co. said while companies like SAP, Adobe and Intuit could see a rebound, he is not yet convinced the worst risks have been fully priced in.

Analysts say the market is still trying to understand how AI will affect future software demand. “We’re seeing repricing as confidence in future software growth adjusts in an AI-driven world,” said Rene Reyna of Invesco. “Is it overdone? It’s too early to tell.”

For now, investors are watching earnings reports closely to determine whether the recent slump presents a buying opportunity or signals deeper trouble for the software sector.