IBL News | New York
Investors and stock traders continue to question whether software companies such as Salesforce, Adobe, and others can withstand the competition and the threat posed by AI-powered rivals.
Selloff has intensified with each new announcement from AI companies. In the first two months of 2026, the State Street SPDR S&P Software & Services ETF, which tracks an equal-weight benchmark of about 140 software companies, has dropped 20% and almost 30% since its high from this past fall.
Despite these classical software companies‘ pricey subscriptions, minimal capital expenditures, and strong profit margins, investors wonder how long the pain can last.
Companies in the State Street software ETF have lost a combined $1.6 trillion in market capitalization this year.
These corporations are trading at roughly 19 times their next 12 months of earnings, down from a peak of more than 47 times in 2022. Companies in the broad S&P 500, meanwhile, are trading at close to 22 times forward earnings.
• Microsoft, AppLovin, Intuit, Salesforce, and ServiceNow have each lost at least $50 billion in market capitalization.
• Intuit, the maker of TurboTax and QuickBooks, is the S&P 500’s worst performer year to date, dropping some 42%.
• The human-resources software platform Workday posted a 38% decline.
• Atlassian, the maker of Jira and Trello, is now trading near 22 times forward earnings.
The slump extends beyond stocks. Software accounts for around 13% of speculative-grade corporate loans that were broadly syndicated by banks to investors. Some of the biggest private lenders are getting caught in the carnage.