{"id":4045,"date":"2026-03-18T15:15:36","date_gmt":"2026-03-18T15:15:36","guid":{"rendered":"https:\/\/tradertideinsights.com\/?p=4045"},"modified":"2026-03-18T15:15:36","modified_gmt":"2026-03-18T15:15:36","slug":"has-the-software-selloff-bottomed-out-heres-what-experts-think","status":"publish","type":"post","link":"https:\/\/tradertideinsights.com\/?p=4045","title":{"rendered":"Has the software selloff bottomed out? Here’s what experts think"},"content":{"rendered":"
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Software stocks are showing early signs of recovery after months of heavy selling, with analysts debating whether the sector has reached a lasting bottom.<\/p>\n

The S&P 500 software index logged its strongest weekly performance since May 2025 last week, while the iShares Expanded Tech-Software Sector ETF (IGV) has rebounded about 10% from its February low. <\/p>\n

Despite the bounce, the ETF remains down roughly 20% so far this year, underperforming broader global equities, which have been largely flat.<\/p>\n

Positioning clouds outlook for a sustained recovery<\/h2>\n

Analysts at Barclays say the recent rally may reflect improving sentiment but caution that investor positioning continues to be a key factor. <\/p>\n

“While hedge funds have materially reduced exposure, long-only portfolios remain heavily invested. Therefore, despite increasingly attractive valuations, this positioning backdrop makes it difficult to call a definitive bottom in software,” write Barclays analysts including Sven Merkt in a Monday note.<\/p>\n

“That said, we see the current levels as very attractive for long-term focused investors.”<\/p>\n

The bank added that fresh developments in artificial intelligence could continue to pressure valuations, particularly as new tools and capabilities raise questions about the long-term demand for traditional software products.<\/p>\n

Analysts see disconnect between valuations and good quality fundamentals<\/h2>\n

Concerns over the impact of AI have been central to the sector\u2019s decline. <\/p>\n

Investors worry that increasingly capable AI agents could allow companies to build their own software solutions, reducing reliance on established vendors.<\/p>\n

Announcements from firms such as Anthropic and OpenAI have repeatedly triggered selloffs across software and other industries. <\/p>\n

Shares of International Business Machines, for instance, came under pressure<\/a> following the release of new AI tools that underscored these risks.<\/p>\n

However, some investors argue the fears may be overdone. <\/p>\n

Portfolio managers point to a disconnect between valuations and underlying fundamentals, suggesting that the market may be pricing in overly pessimistic scenarios.<\/p>\n

\u201cWe see a big disconnect between valuations and high-quality fundamentals, where the risks seem exaggerated,\u201d said Hua Cheng, a portfolio manager at Mirova, which has $39 billion in assets in a Bloomberg report<\/a> last week. <\/p>\n

Fundamentals remain resilient despite selloff<\/h2>\n

Even as stock prices declined, earnings expectations have held firm. <\/p>\n

Software and services companies in the S&P 500 are projected to deliver around 21% earnings growth this year, up from earlier estimates of 17%.<\/p>\n

Corporate performance has also been strong. <\/p>\n

In the fourth quarter, 93% of software firms in the index exceeded profit expectations, significantly higher than the broader market\u2019s beat rate.<\/p>\n

\u201cAfter asking various experts, generalists, Gemini, ChatGPT and Claude, we have still not come across a single software company that expects a negative revenue effect from AI in 2026,\u201d Deutsche Bank strategists wrote in a note released last week in which they turned overweight on software within the tech sector.<\/p>\n

\u201cWe think AI disruption worries have peaked.\u201d<\/p>\n

The shift in sentiment is also visible in market activity. <\/p>\n

Hedge funds have started to unwind bearish positions after short bets reached their highest level in 17 years in February, the Bloomberg report noted. <\/p>\n

Meanwhile, a basket tracking software stocks versus semiconductors compiled by Goldman Sachs has risen about 9% this month, driven by short covering and rotation out of crowded chip trades.<\/p>\n

Options data similarly indicates renewed bullish interest, with investors re-engaging after the sector reached deeply oversold levels, the Bloomberg report said. <\/p>\n

Selective opportunities emerge in AI transition<\/h2>\n

Amid the uncertainty, analysts are increasingly focusing on companies best positioned to benefit from AI rather than be disrupted by it.<\/p>\n

Barclays identifies SAP as a leading beneficiary, citing its ability to embed AI into enterprise workflows such as finance, supply chain and procurement. <\/p>\n

\u201cSAP could be a real AI beneficiary if the company executes,\u201d the analysts wrote, assigning the stock an Overweight rating and maintaining a \u20ac240 price target.<\/p>\n

Other firms seen as relatively well positioned include Temenos and Dassault Syst\u00e8mes, supported by strong industry-specific advantages.<\/p>\n

Temenos, in particular, is viewed as largely insulated from AI disruption due to high switching costs, regulatory complexity and entrenched positions in core banking systems.<\/p>\n

Still, analysts warn that the path forward for software stocks is unlikely to be smooth. <\/p>\n

While valuations appear increasingly compelling for long-term investors, uncertainty around AI\u2019s ultimate impact and shifting investor positioning suggest volatility could persist in the near term.<\/p>\n

The post Has the software selloff bottomed out? Here's what experts think<\/a> appeared first on Invezz<\/a><\/p>\n

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Software stocks are showing early signs of recovery after months of heavy selling, with analysts debating whether the sector has reached a lasting bottom.The S&P 500 software index logged its strongest weekly performance since May 2025 last week, while the iShares Expanded Tech-Software Sector ETF (IGV) has rebounded about 10% from its February low. Despite…<\/p>\n","protected":false},"author":1,"featured_media":4046,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-4045","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-stock"],"_links":{"self":[{"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/posts\/4045","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=4045"}],"version-history":[{"count":0,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/posts\/4045\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=\/wp\/v2\/media\/4046"}],"wp:attachment":[{"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=4045"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=4045"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/tradertideinsights.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=4045"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}