For more than a decade, software stocks were basically the market's golden children. High margins, recurring revenue, sticky customers. What could go wrong? Well, apparently a lot. The software sector is currently experiencing one of its most brutal selloffs in years, and the numbers tell a story of complete technical and fundamental breakdown.
The iShares Expanded Tech-Software Sector ETF (IGV), which tracks the industry's biggest names, just logged its seventh consecutive down day. That's the longest losing streak since January 2024. But it's not just the duration that's alarming—it's the velocity. The index has dropped 16% in those seven sessions alone, a pace of destruction not witnessed since the panic selling of March 2020 when COVID first hit.
Looking at the year-to-date numbers, things get even grimmer. Out of the ETF's 110 holdings, exactly 100 are in the red. That's a 91% loss rate across the entire sector. More than 20 stocks have fallen over 30%, highlighting just how violent and indiscriminate this selloff has become. The question everyone's asking: is this AI-driven creative destruction, or just a really bad mood swing?
The Carnage List: Who's Getting Hit Hardest
At the top of the losers' list sits Intapp Inc. (INTA), down a staggering 49.7% year-to-date. Right behind it is Braze Inc. (BRZE), which has shed 45.7%, and Unity Software Inc. (U), down 45.3%. These aren't small speculative plays—they're venture-backed companies that went public with billion-dollar valuations and real customer bases.
The pain extends well beyond those three names. AppLovin Corp. (APP) has dropped 42.2%. HubSpot Inc. (HUBS), a marketing automation darling, is off 39.2%. ServiceTitan Inc. (TTAN) has fallen 38.9%, while Klaviyo Inc. (KVYO) is down 38.4%.
Then there's PAR Technology Corp. (PAR), down 35.6%, Guidewire Software Inc. (GWRE), off 35.5%, and Atlassian Corp. (TEAM), which has lost 35.0% of its value this year. Even established household names aren't immune. Intuit Inc. (INTU), the company behind TurboTax and QuickBooks, and DocuSign Inc. (DOCU), which became a pandemic darling, have both dropped more than 30% year-to-date.
What's striking is how broad this is. We're not talking about a handful of busted growth stories—this is sector-wide repricing.
The Technical Picture Is Equally Ugly
Beyond the raw price declines, the technical indicators are flashing deep red. A shocking 97 out of the IGV ETF's 110 constituents are now trading below their 200-day moving average, a key long-term trend indicator. That's 88% of the entire sector in technical breakdown mode.
Some stocks are trading absurdly far below that level. Strategy Inc. (MSTR) is 59.9% below its 200-day average. PAR Technology Corp. (PAR) is 52.2% below. Varonis Systems Inc. (VRNS) sits 49.5% under, while HubSpot is 49.1% below and Intapp is 48.9% beneath its trend line.
Commvault Systems Inc. (CVLT) is down 48.1% from its 200-day, MARA Holdings Inc. (MARA) is 46.6% below, C3.ai Inc. (AI) has fallen 44.5% beneath it, Rapid7 Inc. (RPD) is 43.9% under, and Nutanix Inc. (NTNX) sits 42.7% below its long-term average.
Then there's the Relative Strength Index, or RSI, which measures momentum and can signal when a stock is oversold. The IGV ETF's 14-day RSI recently hit 16, the lowest reading since September 2001. That's not a typo—we're talking about post-9/11 panic levels.
Nineteen individual stocks within the ETF now have RSI readings below 20, which is considered deeply oversold territory. HubSpot sits at 19.7. Open Text Corp. (OTEX) has an RSI of just 11.8. Electronic Arts Inc. (EA) is at 12.1. Unity Software shows 17.1. Salesforce Inc. (CRM), one of the sector's giants, has an RSI of 18.9. And Intuit comes in at 19.3.
When this many technical indicators are screaming "oversold" at once, you're either looking at a massive buying opportunity or a genuine paradigm shift. The market seems to be betting on the latter.
What's Actually Driving This Collapse?
The proximate cause is fears around AI disruption. Macro strategist Andreas Steno Larsen has been vocal about this, arguing that AI tools are directly replacing expensive SaaS platforms. Why pay thousands per month for enterprise software when an AI agent can do the same work for pennies? Software companies are reportedly seeing pricing pressure, slower subscription renewals, and weaker customer retention as businesses experiment with cheaper AI alternatives.
"The services economy will die because of AI," Larsen said, summing up the bear case in one blunt sentence.
But not everyone buys that narrative. Nvidia Corp. (NVDA) CEO Jensen Huang pushed back hard on this idea at the Cisco AI Summit this week. He called fears of software obsolescence "illogical," arguing that AI doesn't replace software—it runs on software. AI models need infrastructure, APIs, development platforms, and management tools. All of that is software. Huang's view is that the sector isn't dying, it's evolving, and the current selloff is more about valuation reset than existential threat.
So who's right? Probably both, to some degree. Legacy software platforms that haven't adapted to AI are likely in real trouble. Companies charging premium prices for tasks that can now be automated are going to face compression. But the companies building the infrastructure for AI—think developer tools, cloud platforms, data management—are arguably more valuable than ever.
The problem is that the market isn't making fine distinctions right now. It's selling everything with a "Software" label and asking questions later.
What Comes Next?
The honest answer is nobody knows. Oversold conditions can persist longer than anyone expects, especially when a structural narrative takes hold. But historically, when technical indicators reach these extremes, some kind of bounce usually follows—even if it's just a relief rally before more pain.
What's undeniable is that software's decade-plus run as Wall Street's favorite growth story has been violently interrupted. Investors are reassessing what "quality" means in the age of AI, what kind of moats actually hold up, and which business models are genuinely defensible versus just benefiting from a rising tide.
For now, the software sector is in full capitulation mode. Whether this is the final washout or just the beginning of a longer reset will depend on whether AI really does cannibalize these business models—or ultimately expands them in ways we haven't fully imagined yet.
