Software stocks are getting slaughtered — and some of the smartest money on Wall Street thinks the selloff has gone way too far.
The numbers are ugly. Salesforce is down 33% in 2026. Shopify still trades at 80 times trailing earnings despite getting hammered. ServiceNow’s P/E ratio is north of 100. The entire iShares Expanded Tech-Software ETF has cratered nearly 19% this year. The fear? That AI tools have gotten so good they can replace the software products these companies sell.
It’s a legitimate concern. When a business can build a functional CRM alternative with a few AI prompts and a weekend of work, the moat around a $50,000-a-year enterprise software subscription starts looking awfully shallow. Investors are asking hard questions about whether SaaS profit margins — the beautiful 70%+ gross margins that justified sky-high multiples for a decade — can survive in a world where AI can replicate basic software functionality at near-zero cost.
But here’s where it gets interesting. Value investors are starting to circle.
According to fund managers who’ve lived through multiple market cycles, this AI-driven disruption selloff is creating the most opportunistic environment since the Covid crash of 2020. Back then, high-quality companies traded at deeply depressed valuations even as their fundamentals were stabilizing. The same dynamic is playing out now — except this time, the fear isn’t a virus. It’s artificial intelligence.
The contrarian case starts with a simple observation: the market is pricing in maximum disruption while the actual evidence of disruption remains thin. Yes, AI can theoretically replace software products. But 90% of the Fortune 500 has spent decades codifying their business logic and data within platforms like Salesforce. That institutional switching cost doesn’t evaporate because ChatGPT learned to write code.
Wedbush’s Dan Ives — one of the most-followed tech analysts on the Street — argues the Salesforce selloff in particular is overblown. The company’s installed base of 150,000+ customers creates unique data and context that generic AI models simply can’t replicate. CEO Marc Benioff pivoted Salesforce toward AI as early as 2014, and its Agentforce agentic AI product is already generating revenue. At 35 times trailing earnings, Salesforce looks downright cheap compared to peers.
But the opportunity extends well beyond SaaS. Staffing companies like Page Group and Hays have been crushed by fears that AI will eliminate the need for recruiters. Yet there’s zero evidence that AI has structurally impaired these businesses — and they’re now trading at rock-bottom multiples. Wealth management firms are another sector caught in what some analysts call an “increasingly irrational” selloff, despite the fact that robo-advisors have been threatening them for over a decade without meaningful impact.
The key insight for traders: companies trading on rich multiples leave zero margin for error, which is why the selloff has been so brutal. But when quality businesses get repriced on fear rather than fundamentals, that’s historically been the time to start building positions — not running for the exits.
Not every beaten-down software name will bounce back. Some of these companies genuinely face existential threats. But painting the entire sector with the same brush? That’s the kind of indiscriminate selling that creates fortunes for patient investors willing to do the work.