Software is breaking investors’ hearts – again.
About a week after its sharpest rebound in almost a year, the group is fading again. The iShares Expanded Tech-Software Sector ETF (IGV) was back in the red last week, and Adobe (ADBE) is reminding investors how quickly hope can disappear. The latest move looks less like a fresh start than a new twist in the market’s AI fear trading.
That leaves investors with the eternal, if not existential, question about market timing: Buy the dip, or sell the rip?
The recovery from the February 23 low was real. IGV climbed about 15% from that low to the previous Friday’s peak, sending a long list of defeated names soaring. Cloudflare (NET), CrowdStrike (CRWD), Datadog (DDOG), Intuit (INTU), and Thomson Reuters (TRI) all posted double-digit gains from the lows.
But hope quickly disappeared.
By Friday afternoon, only a handful of names in the group were still positive for the week. Broad software and cloud ETFs had rolled back. What looked promising late last week once again started to feel like a trade to hire rather than a leadership to trust.
Software stocks had simply hit a tech wall.
IGV rebounded hard from the February lows, but that move ran straight into major resistance near 88 – a key Fibonacci retracement level and exactly the kind of area where shorts had reason to reload. They did. Strong leadership usually passes the first big test and forces skeptics to rethink the story. Software was not available.
Adobe has become a substitute for that frustration. The stock took a heavy hit on Friday following earnings results and a surprise CEO succession announcement – and is still down more than 25% this year.
In the longer term, the damage goes back much further. ADBE peaked in late 2021, made another run that ended in early 2024 and is now approaching 2019 levels again. Investors have been waiting a long time for a clean turn that has not yet come.
This partly explains why AI for the time being does not seem so much like a tailwind for software, but rather like a new source of doubt.
Software companies can talk about copilots, productivity gains, and smarter workflows all they want. Investors want proof that AI can raise prices, protect margins and generate new revenues – not just defend existing products. Until then, AI can be as much of a valuation headwind as it is a growth story.
Lee Munson, president and chief investment officer at Portfolio Wealth Advisors, put it bluntly in a recent Yahoo Finance interview on the New York trading floor. “Software multiples could go lower. And I think it’s dead money at this point from a charting perspective.”
