- The plunge in software stocks on Wall Street has intensified, with drops of more than 25% from the peak of US technology.
- The rise of artificial intelligence, especially through Anthropic and other startups, is fueling fears that many software business models will become obsolete.
- Software sector indices in the US and Europe are suffering their worst streaks since 2008 and 2002, with sharp corrections in giants such as Microsoft, Oracle, SAP or Amadeus.
- Analysts and investment banks are debating whether the market is witnessing the "end of software" or creating an opportunity due to the oversold sector.
Software stocks have become the new epicenter of market nervousness . What began as skepticism about the rise of artificial intelligence (AI) has transformed, in a matter of months, into an almost apocalyptic pessimism that is shaking Wall Street, spreading to Europe, and is already being felt in the Ibex 35.
Investors' fear is clear: that AI will end up replacing established software business models and erode revenue streams based on licenses and subscriptions that have been running like clockwork for years. The selling wave has hit both long-standing industry giants and companies born in the midst of the AI boom.
A historic collapse in software indices
In the United States, the S&P 500 Software Index has plummeted by nearly 26% since its peak on October 29, coinciding with the all-time high for the technology sector and leading companies like Nvidia. While the S&P 500 as a whole has barely advanced a few tenths of a percent during that period, the group of purely software companies has plunged sharply.
A similar indicator, the S&P North American Software Index , ended January with an approximate 15% drop, its worst month since October 2008, in the midst of the financial crisis's aftermath. The iShares Expanded Tech-Software Sector (IGV) ETF, a key benchmark for investors in the sector, has lost more than 14% in just six trading sessions , also registering its worst monthly performance in January since the Great Recession.
This start to 2026 has, in fact, become the worst monthly streak for software in almost two decades . None of the companies that make up the main software sector indices on Wall Street are trading above the price at which they began the year, and firms like Intuit and ServiceNow are leading the declines.
Evercore analysts have monitored the sector's relative performance against the S&P 500 and conclude that, in the last three months, software has recorded its worst performance against the overall index since 2002 , when the aftereffects of the dot-com bubble burst were still being felt.
Artificial intelligence: from opportunity to systemic threat
The root of the problem is the perception that AI could undermine the value of many software applications as they are currently designed. Tools capable of writing documents, writing code, or automating corporate tasks are seen as direct competition for products that, until now, have been essential for thousands of companies.
The start of the year has been marked by a series of announcements that have acted as a catalyst for sales. The startup Anthropic has been the most frequently mentioned name on the stock exchanges: first with the launch of Claude Cowork , a generative AI platform geared towards productivity and the legal sector, and then with a new legal tool and a model designed to perform financial analysis . Each of these milestones has been followed by sharp declines in the share prices of the most exposed software companies.
In the legal and professional information sector, companies such as London Stock Exchange Group, Thomson Reuters, CS Disco, and LegalZoom suffered double-digit declines following Anthropic's announcements. Similar movements were observed in the financial data and analytics sector, with intense pressure on groups like Experian and other providers specializing in content and services for law firms and legal departments.
Fear has also spread to the world of video games and digital content . The launch of Alphabet's Project Genie, capable of generating immersive worlds from text or images, affected publicly traded companies in the gaming sector, which saw investors reconsider the future value of their graphics engines and design tools.
The result is a feeling that many operators are already describing as "SaaSpocalypse": forced selling, "get me out of here" orders , and a capitulation where the priority is to exit the sector at almost any price rather than discriminate between winners and losers.
The punishment for software giants: from Microsoft to Oracle and SAP
The collapse has spared no one. Among the major US listed companies, Microsoft, Oracle, ServiceNow, Adobe, Salesforce, and Intuit have all experienced significant corrections from their peak in the technology sector.
In the case of Oracle and ServiceNow, the declines are around 40% from the industry's peak, placing them among the hardest-hit companies. For Oracle, in addition to the AI effect, doubts about its funding strategy and the increase in debt issuance are weighing heavily on some market participants.
Microsoft, the world's leading software company and one of Wall Street's "Magnificent Seven," has become the worst performer among the group so far in 2026 , with declines of nearly 18% and a correction of around 25% in the last six months. January was the worst month for its shares in over a decade.
What's striking is that these cuts are coming despite the company posting solid revenue and profit results . Its most recent accounts showed a 29% increase in the Intelligent Cloud division, reaching $32.900 billion, and a 39% jump in Azure revenue. However, the market has chosen to focus on the moderating growth and the fear that, even while leading in AI, the pace won't be enough to justify the valuations achieved.
Even so, some investment firms are beginning to see value. European funds like Sycamore Sustainable Tech have taken advantage of the drop to increase their positions in Microsoft , convinced that the company will solidify its position as a key player in the new AI economy. Its stock multiple has fallen to less than 23 times estimated earnings, the lowest level in about three years, and its technical indicators reflect a marked oversold condition.
Europe is not spared: SAP, Relx and Amadeus, among the most affected
The pressure on software is not limited to Wall Street . In Europe, the Stoxx Europe Total Market Software & Computer Services index has fallen by nearly 15% at the start of 2026 and is down close to 30% year-on-year, in a context where the continent's major equity indices are reaching all-time highs.
European benchmarks like SAP have seen declines of around 18% in the first few months of the year alone, while other firms in the sector such as Relx, Capgemini, Hexagon, and Sage have accumulated significant losses, in some cases approaching or exceeding 25%. This nervousness is particularly evident in specific trading sessions, such as the one that led to Relx's double-digit declines on the UK's FTSE 100.
In Spain, the impact is being felt most acutely through Amadeus , the leading software company on the Ibex 35. The company, focused on solutions for the tourism industry, is leading the index's declines so far in 2026 , with a drop of nearly 14% this year and around 24% in the last six months. The stock has been punished both by the general turnover away from software and by concerns about how AI could disrupt the booking, management, and service processes that are currently its specialty.
The blow to the sector has been felt even on days when European stock markets reflected a mixed or moderately positive tone , with indices such as the German DAX, the French CAC, and the Italian MIB fluctuating between slight gains and losses, while software-related stocks clearly lagged behind. The IBEX, for its part, has alternated sessions pressured by stocks such as Amadeus and Indra with rebounds supported by banking, steel, and energy companies.
The software business model is under review.
Beyond the daily stock market noise, the heart of the debate is whether AI implies a structural change in the software revenue model . Many companies in the sector rely on subscription models, charging per user or per "seat"; a system that could suffer if AI tools allow companies to do the same with fewer connected users or fewer active licenses.
JP Morgan has gone so far as to suggest that the market is anticipating the "end of software" on Wall Street rather than a simple transformation. One of its analysts, Toby Ogg, summarized the current climate by noting that the sector "is not only guilty until proven innocent, but is being condemned before the trial." In other words, the worst-case scenario is being priced in even before the real impact of AI on revenue is seen.
From the perspective of other asset managers, such as Invesco, the market is currently undergoing a readjustment of growth expectations . As the true capabilities of AI become clearer, analysts are revising their future sales estimates for traditional software downwards, resulting in lower multiples and constant pressure on valuations.
This adjustment is also reflected in quarterly earnings. This quarter, only about two-thirds of S&P 500 software companies have exceeded revenue projections , a significantly lower percentage than the technology sector as a whole. While many have beaten profit forecasts, the market has downplayed these positive surprises and focused instead on forward guidance and AI narratives.
Firms like Piper Sandler have reacted by cutting recommendations on stocks such as Adobe, Freshworks, and Vertex , warning that "seat compression" narratives and the rise of AI-assisted coding could limit the multiples investors are willing to pay for these businesses.
Anthropic and the domino effect on credit and private capital
The disruption attributed to Anthropic and other AI startups has not only shaken the stock market . The repercussions have reached the world of credit and private equity, where many portfolios have a significant weighting in debt-financed software companies.
Firms like Apollo have nearly halved their exposure to software-related loans in their direct lending funds, from levels close to 20% to significantly lower figures. Other leading players in Europe, such as Arcmont Asset Management and Hayfin Capital Management , have hired external consultants to analyze in detail which portfolio companies might be most vulnerable to the rise of AI.
On the stock market, listed companies focused on business development and finance, with a strong presence in software, have also been impacted. Groups like Blue Owl Capital have seen their shares fall by double digits amid the perception that a significant portion of their portfolio could suffer negative revaluations if their portfolio companies lose their competitive edge against new AI solutions.
The domino effect has even reached the syndicated loan market, where loans linked to software companies have begun to show discounts compared to other sectors, reflecting the increase in the risk premium that investors demand to continue financing these types of companies.
End of software or opportunity after overselling?
Despite the prevailing gloomy tone, not all analyses point to a bleak future. Some experts, such as those at BTIG and LPL Financial, indicate that the sector is experiencing unprecedented levels of overselling and that multiples have fallen to areas that could be the starting point for a medium-term recovery.
Jonathan Krinsky, chief technical analyst at BTIG, himself acknowledges that software is "probably oversold enough for a rally," though he cautions that rebuilding confidence and a solid foundation will take time . In his view, the sector's relative weakness accelerated sharply in the last quarter of last year and still shows no clear signs of having bottomed out.
Other fund managers, such as Thomas Shipp (LPL Financial) and Stephen Yiu (Blue Whale Growth Fund), emphasize the difficulty of distinguishing between the potential winners and the possible victims of AI . It is clear that some software companies will emerge stronger by integrating artificial intelligence into their products and processes, but currently the range of possible scenarios is too broad to draw a clear line.
Meanwhile, the issue of valuations remains a key concern. Although stocks like Nvidia and Palantir continue to trade at historically high multiples, the decline from their October highs has somewhat lowered their P/E ratios. In Nvidia's case, for example, the current price represents a discount of around 16% compared to the peak P/E ratio reached in 2025, which some fund managers now consider a more reasonable entry point.
For some in the market, the current scenario is reminiscent of other periods of profound technological change, where indiscriminate sales ultimately created opportunities for companies that were able to adapt. For others, however, caution remains the watchword: until it becomes clear which software business models can coexist with AI and which will be displaced, it seems premature to make a strong commitment to the sector.
Taken together, the plunge in software stocks on Wall Street and its repercussions in Europe paint a picture in which artificial intelligence acts simultaneously as an engine of innovation and a trigger for a crisis of confidence . Investors are torn between the fear of missing out on the next big technological wave and the fear of being stuck in businesses that may become obsolete. Time will tell whether the current punishment has been excessive or whether, on the contrary, the market is simply adjusting downwards on expectations that had been raised too high.