Software mageddon may sound like a disaster movie from the 1970s, but for investors it was all too real.
The term describes the recent sell-off in software and technology stocks, driven by fears that generative AI companies could make traditional software companies irrelevant.
As of February 9, the North American Tech-Software iShares ETF (IGV) was down 24.6% year to date. Some investors have left the sector, while others are looking for bargains.
Wedbush analyst Dan Ives dismissed the gloom, stating that it is “crystal clear to us that the AI revolution is accelerating at a breakneck pace, with 2026 being a watershed year for AI.”
“The market is predicting a near-term doomsday scenario for software companies, which we believe is extremely exaggerated,” he said in a Feb. 8 research note. “The sell-off at tech giants Salesforce and ServiceNow is far exaggerated, and both companies will be core participants in the AI revolution.”
Software mageddon was a major topic on the February 5 edition of TheStreet Pro’s Stocks & Markets Podcast, when host and contributor Chris Versace spoke with Lindsey Bell, chief investment officer at 248 Ventures and chairman of BetterInvesting.
“It’s been an ugly week, hasn’t it?” Bell said, noting that many technology companies reported strong quarterly results. “Everyone knows there is a demand for AI right now. The question is how long will it last and what will be the return and profitability of all this expenditure.”
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Bell called it a conundrum for some of the bigger names in the industry given their current spending.
“We’ve priced in all the good days,” she said. “Now we’re holding out or even taking some money off the table until we have more clarity on profitability.”
“ServiceNow, Google, Microsoft, Palantir – a lot of the worn-out names,” Versace said, “but their businesses are solid. The quarterly numbers were very good.”
He added that Jensen Huang, co-founder and CEO of AI chipmaker Nvidia (NVDA), Lisa Su, CEO of semiconductor company AMD (AMD), and Rene Haas, CEO of Arm Holdings (ARM), all discussed the sell-off.
“And they all said, ‘This is ridiculous,’” Versace said. “AI is a tool. It will be embedded in software to make better products. It will not eat the world.”
“Some of these companies are currently integrating AI into their systems,” Bell says. “They have strong sales and profitability. The shares aren’t falling off a cliff, but they’re getting beat up like their days are over.”
