Software’s Historic Sell-Off: Is the Worst Already Priced In?

Software stocks have plunged to valuation levels rarely seen outside of major market crises, with roughly 73 % of names trading in oversold territory according to Jefferies — the highest level on record. This unprecedented capitulation reflects deep investor fear that AI could disrupt traditional software models even as fundamentals remain solid in many companies. From ETF performance to diverging sector sentiment, understanding whether this sell-off is overblown or signals deeper structural change is essential for positioning in tech markets now and ahead.

At the beginning of 2026, the software sector is in a situation that looks paradoxical at first glance. A large number of companies have maintained solid revenue growth, but valuations and share prices have fallen to levels more typical of crisis periods. In many cases we are seeing declines of tens of percent from the peaks, and yet sentiment is so negative that the current capitulation of the software market is historically…