The past three months have been a great one for the tech industry. Semiconductor stocks had their best quarter on record, memory stocks boomed and the Nasdaq 100 index rose nearly 30%. But concerns about SaaSpocalypse continue to drag down some of the top companies in the software industry.
When Anthropic announced new tools and updates to its Claude Cowork AI agent in January, software companies were hit with concerns about AI disruption. The announcement caused existential anxiety about the future of many software-as-a-service companies, prompting investors to dump their stocks.
While some software giants have made a comeback, volatility has picked up again recently, with the iShares Expanded Tech Software Sector ETF down about 11% over the past month. Many companies in this space have also been underperforming since the beginning of the year, with Intuit, HubSpot, and Atlassian posting the heaviest losses.
The biggest loss companies in the software sector year-to-date are:
The decline is a quiet reminder to investors that even though AI is lifting most boats, high-tech deals are not benefiting all companies indiscriminately.
Jose Torres, senior economist at Interactive Brokers, said the software selloff is likely to gain momentum again due to investor concerns about the impact of AI. Earlier this year, the market was concerned about software-as-a-service replacing AI. Concerns are currently swirling among some top software companies that their investments in the industry may not pan out.
He pointed to the decline of Microsoft, which has been the biggest spender in the AI race. The company’s stock price has fallen 22% since the beginning of the year, marking its worst month since 2000.
Torres said investors are also aware that interest rates may be trending higher due to inflationary pressures, another factor that could negatively impact the tech industry, including software companies.
“After these solid gains, people are moving to other areas of the market,” he told Business Insider, pointing to the heat fueling memory and chip stocks.
Mark Malek, chief information officer at Siebert Financial, said the panic fueling the software sell-off was likely an overreach by investors. Still, he said the sector could incur further losses due to recent deterioration in investor sentiment.
“Unfortunately, I don’t think this is the bottom,” Malek told Business Insider. “The market definitely has questions about AI trading.”