I’m here to declare that “SaaSpocalypse” as we once knew it is dead. The panic that swept through software stocks in the first two months of 2026 feels like ancient history at this point.
To refresh your memory, companies like Anthropic and OpenAI used to publish seemingly innocuous blog posts touting small productivity advances made possible by AI. That would wipe out tens of billions of dollars in market value from the software sector in question. Rinse and repeat.
SaaS has been in a tough spot for a while. So were legal software stocks. Short sellers took advantage of the opportunity and published a large number of bearish research results. For weeks, it seemed like no software name could escape SaaSpocaplyse’s wrath.
But as the chart below shows, software stocks are turning a corner. The iShares Expanded Tech Software ETF (IGV)’s 13% rise since last Thursday was the fund’s biggest two-day gain since 2001.
This recent surge can be explained by three main factors:
1. Snowflake Revenue (After the market closes on May 27th)
The company’s daily gain on May 28 was 36%, and IGV maintained its gains over the next three days. The company benefited from a double whammy: (1) better-than-expected full-year guidance and (2) a $6 billion deal to use Amazon’s cloud services and chips.
But what really caught investors’ attention was Snowflake’s growing interest in its AI-enabled tools. The company’s results confirm the more commonly accepted idea that software companies are benefiting from AI, rather than being cannibalized by it.
2. Comments from Nvidia CEO Jensen Huang (June 1st)
As if IGV’s 6% rise last Friday wasn’t enough, Huang decided to add fuel to the fire. Speaking at the Computex trade show in Taiwan on Monday, Nvidia’s CEO said, “This is actually an incredible time for software companies.”
Let him explain. “Jensen, a lot of people said AI is coming. Agent AI is coming. So all the software companies are going to go out of business. I said quite the opposite, because there will be so many agents.”
He added: “The world is no longer limited by the number of people, so these agents will have more tools than ever before.”
With this, the story of software recovery gained a valuable co-sign from one of the leading figures in AI. It’s hard to imagine more impactful support, and stocks soared on Monday.
3. Short sellers will be squeezed
You know I had to turn back to the haters! The rise in software stocks has been fueled by the reduction of short positions.
Following the first SaaSpocalypse, short interest levels skyrocketed across the industry. But the rebound from multi-year lows caught some of those positions off guard, exacerbating what was already a rapid recovery.