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Why I’m becoming increasingly concerned about the recent plunge in software stocks

Why I’m becoming increasingly concerned about the recent plunge in software stocks

101 finance101 finance2026/02/15 13:33
By:101 finance

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The video was broadcast live from Yahoo Finance headquarters at around 5:30 a.m., where I shared my immediate thoughts on the sharp decline in software stocks. For those of you who are up before dawn analyzing the markets, expect more live updates like this in the near future.

Some viewers took issue with my use of the word "crash" to describe the situation in software stocks. But what else would you call it? I assure you, I'm not exaggerating.

Take Workday (WDAY) as an example: its shares have dropped 30% in just one month, even though there's no sign the company is at risk of shutting down in 2027 due to an Anthropic (ANTH.PVT) model update.

If you have a better term for this market movement, let me know—just don't suggest "pullback."

Others have asked me to recommend which software stocks to buy now. I won't be doing that for two reasons: first, I no longer provide stock picks; second, I don't believe we've reached the bottom for software stocks yet.

Today's Focus: Contagion

The main reason for my concern about the current downturn in software stocks is that the weakness seems to be spreading to other sectors. Thursday's steep market losses were a clear sign of this trend.

Wall Street is starting to pay attention as well.

"Regardless of arguable ubiquity of AI application legitimately widening shakedown, the wider selloff in commodities/gold have hallmarks of cross-liquidation involving financial contagion risks," noted Mizuho strategist Vishnu Varathan. "Nonetheless, there are increasingly legitimate worries — involving with 'contagion' and froth in bull markets — associated with this 'correlation creep', whereby AI-driven sell-off cascade more indiscriminately."

Varathan raises an important point, and it may signal where investor sentiment is headed. Imagine a storm cloud forming overhead—markets are likely to keep adjusting as this uncertainty grows.

Only time will reveal whether the dramatic sell-off in software stocks has gone too far. One thing is certain: it's a pivotal moment in technology as billions are invested in building out America's AI infrastructure. However, not every tech company will benefit equally from this trend.

Perspectives on AI and the Workforce

Superhuman CEO Shishir Mehrotra recently shared his thoughts on Yahoo Finance's Opening Bid: "I don't view [AI] as a job taker. I view it as a job expander. In my mind, we're about to give everybody 100 new employees." He believes that the workforce will soon need to develop management skills to oversee digital teams.

If this perspective doesn't match the growing anxiety about AI-driven contagion in the markets, then perhaps I'm missing something.

StockStory is dedicated to helping individual investors outperform the market.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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