Software rethought

Software stocks have significantly underperformed over the last year, driven largely by fear that artificial intelligence could disrupt rather than augment established providers. One of the worries is that newcomers can build software with AI, lowering the barriers to entry. Another concern is that enterprises will build their own software using AI. The sharp sell-off in the sector also appears emotionally driven with some “just wanting to get out.” Notably, these concerns have yet been realized in results, as most software providers continue to report earnings above estimates. The S&P North American Expanded Technology Software Index presently trades at 22 times forward earnings on 45% expected earnings growth.

Source: Bloomberg, S&P, February 2026.