Wall Street Seeks Software Bargains Amid Sell-Off
Investors on Wall Street are identifying buying opportunities in the software sector following a significant sell-off. Companies like Intuit and CrowdStrike are being viewed as potential winners in the evolving landscape influenced by AI technologies. The software stocks experienced a sharp decline at the beginning of 2026, entering bear market territory due to concerns that AI tools could disrupt the traditional software-as-a-service (SaaS) business model, which typically relies on user-based pricing.
Declining Stock Prices Raise Investor Concerns
There are apprehensions that the rapid evolution of AI might undermine the historically strong pricing power and high operating margins of major software firms. While the downturn paused on Tuesday, with the iShares Expanded Tech-Software Sector ETF rising nearly 1.8%, the group remains down over 25% for the year. This recovery followed the announcement by Anthropic of updates to its Claude Cowork tool, allowing businesses to incorporate AI into enterprise applications such as Salesforce-owned Slack, Intuit, and Google’s Gmail.
Analysts Support Software Sector Stability
Some analysts argue that the recent sell-off is exaggerated, particularly among cybersecurity and traditional software companies, creating appealing entry points for long-term investors. Analyst Brent Thill from Jefferies identified “durable vendors” ready to adapt to the AI transition. He noted that it is now more cost-effective for companies to partner with established software vendors instead of building apps independently.
Key Players in the Software Market
Thill highlighted Intuit, Procore Technologies, Atlassian, and Salesforce as companies with robust models and active AI adoption that support growth. Despite a 29% decline this year, Salesforce is well-positioned to innovate with AI agents. Jefferies also considers Intuit a top pick in the large-cap category, given its extensive application of AI across a massive customer database.
Opportunities in Cybersecurity Software
JPMorgan analyst Brian Essex views the cybersecurity software sector as promising, especially for firms focused on enterprise security, despite a significant drop in stock prices this year. Companies like CrowdStrike, Palo Alto Networks, ZScaler, and Okta are seen as “more AI resilient.” Essex emphasizes that cybersecurity is increasingly viewed as essential for enterprise AI adoption, driving demand even outside traditional budgets.
Unique Value Proposition of Cybersecurity Firms
Essex defended CrowdStrike, which has seen a nearly 25% decrease in its stock this year, arguing that its diverse services across a broad customer base create a competitive advantage that is difficult to replicate. He pointed out that more customers enhance the platform’s effectiveness, supporting the company’s robust detection and remediation capabilities.
Long-Term Investment Perspective
Jeff Kilburg, the CEO of KKM Financial, recommends holding onto specific software stocks amid recent volatility. His firm has invested in Oracle and Microsoft, both of which are down more than 20% due to various concerns. Kilburg believes these companies have a strong long-term outlook and encourages investors not to shy away from them despite current market fears. The leading holdings in Kilburg’s Essential 40 Stock ETF feature defensive stocks rather than aggressive tech investments.
