Remember when everyone was convinced AI would obliterate the software industry? Yeah, about that. Deutsche Bank just threw cold water on the whole doomsday narrative, and honestly, they’ve got a point.
The bank’s strategists dropped a bullish call on software stocks this week, essentially saying: “Hey, the market’s freaking out over nothing.” They upgraded software to “overweight” and are now neutral on tech overall—a pretty significant flip from their previous “underweight” stance.
Here’s the thing that’s wild: software stocks are trading at historically low premiums compared to the broader market. Translation? The market is pricing in a catastrophe that, well, isn’t actually happening. The iShares Expanded Tech-Software Sector ETF has tanked 20% since January while the broader tech sector only dropped 4%. That’s a massive gap for a sector that, according to Deutsche Bank, isn’t actually dying.
The real kicker? Deutsche Bank couldn’t find a single software company expecting AI to hurt their revenue this year. Not one. Yet the narrative has been all doom and gloom about AI disruption while completely ignoring the upside—like lower programming costs and better products thanks to AI tools.
Think about it: AI is making developers more productive, not replacing them. Companies like Intuit, Salesforce, ServiceNow, and Adobe got hammered in the selloff, but they’re still growing. US software companies’ earnings grew 29% year-over-year in Q4 2025, and 2026 expectations are being revised higher. That’s not the profile of a dying industry.
Deutsche Bank also pointed out something historical: when software stocks have crashed before, it was because earnings actually collapsed—like in 2022, 2008, and 2001. But that’s not what’s happening now. The fear is disconnected from reality.
The media’s been obsessed with AI disruption headlines, and you can literally see it in the data. Mentions of “AI disruption” in the news spiked dramatically earlier this year, then plummeted. The panic peaked, and now reality is catching up. Software companies are delivering solid earnings, and the market’s starting to notice.
So what does this mean for investors? If you’ve been sitting on the sidelines waiting for software stocks to crater, you might be waiting a while. The companies that got beaten down—Salesforce, Adobe, ServiceNow—are now showing up on stock pick lists from Jefferies, JPMorgan, Morningstar, and Wedbush. These aren’t random picks; they’re backed by actual earnings growth and forward guidance.
The bottom line: the market overreacted to AI fears, software stocks got cheap, and now the fundamentals are starting to shine through. Deutsche Bank’s basically saying the worst of the panic is over. Whether you believe them depends on whether you trust earnings growth and analyst research more than headlines. Spoiler alert: you probably should.