It's been a stellar three months for the tech trade. Chip stocks logged their best-ever quarter, memory stocks boomed, and the Nasdaq 100 climbed almost 30%. Yet, fears of the SaaSpocalypse are still dragging some of the top names in the software space.
Software companies were pummeled by fears of AI disruption in January, when Anthropic unveiled new tools and updates for its Claude Cowork AI agent. The announcements sparked existential fears about the future of many software-as-a-service companies, leading investors to dump shares.
Some software giants have staged a comeback, but the volatility has picked up again recently, with the iShares Expanded Tech Software Sector ETF losing about 11% in the last month. Many firms in the sector also remain down on a year-to-date basis, with Intuit, HubSpot, and Atlassian posting the steepest losses.
Here are some of the software sector's biggest losers year to date:
- Intuit: -58%
- HubSpot: -51%
- Atlassian: -49%
- Workday: -41%
- Salesforce: -38%
- Adobe: -38%
- Oracle: -24%
- Microsoft: -22%
- AppLovin: -18%
- H&R Block: -9%
The declines are a quiet reminder for investors that even as AI lifts most boats, the tech trade isn't indiscriminately rewarding all companies.
José Torres, a senior economist at Interactive Brokers, said the software sell-off likely picked up steam again due to concerns fears among investors about the impacts of AI. At the start of the year, the market was worried about software-as-a-service being replaced by AI; now, worries are swirling around investments in the industry not panning out among some top software companies.
He pointed to the decline in Microsoft, which has been one of the biggest spenders in AI race. Shares of the company are down 22% year to date, and are on track for their worst month since 2000.
Investors are also cognizant that rates may be headed higher due to inflationary pressures, another factor that could hurt the tech trade, software firms included, Torres said.
"After those robust gains, folks are moving into other areas of the market," he told Business Insider, pointing to the heat fueling memory and chip stocks.
Mark Malek, the CIO of Siebert Financial, said the panic fueling the software sell-off was likely overdone by investors. Still, he said the sector could be in for more losses, due to how sour investor sentiment has turned lately.
"Unfortunately, I don't feel like this is the bottom," Malek told Business Insider. "The market is definitely questioning itself on the AI trade."
