Shares of US software and data services companies continued to slide for a seventh consecutive session on Thursday, as investors grew increasingly concerned that rapid advances in artificial intelligence could disrupt long-established business models across the sector. The prolonged selloff has wiped out roughly $1 trillion in market value since late January, underscoring the scale of anxiety gripping technology investors.
The S&P 500 software and services index fell 4.6 percent on the day, extending what market participants have dubbed “software-mageddon”. The index is now trading at levels not seen relative to key technical benchmarks since mid-2022.
Selloff
Several major technology companies were among the hardest hit. ServiceNow shares dropped 7.6 percent, Salesforce fell 4.7 percent, and Microsoft declined 5 percent. The losses reflect a broad retreat from software stocks rather than company-specific developments.
“This is a sell-everything mindset at this point,” said Dave Harrison Smith, chief investment officer and head of technology investing at Bailard. He noted that fear, rather than fundamentals alone, appeared to be driving market behaviour.
AI Concerns
Investor unease has been fuelled by uncertainty over how quickly and deeply artificial intelligence could disrupt traditional software and data-driven businesses. Canada-based Thomson Reuters highlighted those fears earlier this week when its shares recorded a record one-day fall after concerns emerged that a new plug-in from Anthropic’s Claude could affect its legal services business.
Despite reporting quarterly results largely in line with expectations and raising its dividend, Thomson Reuters shares fell a further 5.6 percent on Thursday. The company said it was already seeing tangible benefits from its AI investments, but that reassurance did little to calm markets.
Ben Snider, Goldman Sachs’ chief US equity strategist, said near-term earnings may not be enough to offset longer-term uncertainty. He noted that while results could signal resilience, they may still be insufficient to disprove potential downside risks from AI disruption.
Technical Pressure
The selloff has pushed the S&P 500 software and services index to around 21 percent below its 200-day moving average, the deepest such gap since June 2022. This technical weakness has discouraged dip buyers, who have largely stayed on the sidelines.
“There has not been dip-buying, but we are reaching a watershed moment,” said Nick Giorgi, chief equity strategist at Alpine Macro. He added that such washouts, while painful, have historically created longer-term entry points, though timing remains difficult.
Rotation
The decline in software stocks has coincided with a broader rotation out of technology and into more value-oriented sectors such as consumer staples, energy, and industrials. These areas had lagged during the tech-led bull market that began in October 2022.
“We’re seeing people de-risk from technology in a general way, and we’ve been seeing that since the beginning of the year,” said Andrew Wells, chief investment officer at SanJac Alpha.
Data from Ortex showed rising short interest in mid- to large-cap software companies over the past three months, particularly among cybersecurity and software-as-a-service firms. Goldman Sachs data also pointed to a sharp reduction in hedge fund exposure to software stocks, even though funds remain net long on the sector overall.
Spillover
The pressure has spread beyond software companies themselves. Asset managers with exposure to the sector through private credit have also come under scrutiny. Alternative asset manager Blue Owl, which extended its losing streak to an eleventh session, said software exposure accounts for about 8 percent of its assets under management.
Overseas markets showed mixed reactions. London Stock Exchange Group shares rose 5.8 percent, while RELX and Wolters Kluwer gained modestly. In contrast, India’s software exporters index slipped 0.7 percent, a day after recording its worst session in nearly six years.
Volatility
Market volatility has increased sharply across asset classes, including equities, commodities, and digital assets. Analysts attribute the turbulence partly to leveraged investors being forced to unwind positions.
The Cboe Volatility Index rose to 21.77, its highest close since November. Gold, silver, and bitcoin also extended recent declines, with bitcoin falling 13 percent to around $62,890.
“This is a lot of relative bets going wrong, and some kind of reset is happening in market internals,” said John Hardy, global head of macro strategy at Saxo. “Time will tell how deep it runs.”
FAQs
Why are US software stocks falling?
Investors fear AI could disrupt traditional software business models.
How much value has the sector lost recently?
About $1 trillion in market value since late January.
Which major stocks were hit hardest?
ServiceNow, Salesforce, and Microsoft saw sharp declines.
What is happening to investor sentiment?
Many investors are rotating out of tech into value sectors.
