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ServiceNow Inc. signage during the Nvidia GPU Technology Conference in San Jose, California, on March 20, 2025.
David Paul Morris | Bloomberg | Getty Images
Software stocks on Thursday slid deeper into an ongoing intense sell-off this year as investors recoiled from the sector on growing fears that artificial intelligence could upend many firms’ business models.
The iShares Expanded Tech-Software Sector ETF (IGV) dropped about 5% in morning trading, on pace for its biggest one-day decline since last April during the tariff-triggered downturn. The fund is now down about 21% from its recent high, pushing the software industry into bear-market territory and underscoring how quickly sentiment has turned against one of Wall Street’s former favorite industries.
The iShares Expanded Tech-Software Sector ETF over one year
ServiceNow one day
“Good, but not good enough,” Morgan Stanley analysts said in a note of ServiceNow report. “In an environment of heightened investor skepticism on incumbent application vendors, stable growth, in line with expectations, likely falls short of shifting the narrative.”
The pressure has deepened across the sector as investors question whether AI competitors and automation tools could erode demand for traditional software licenses and workflows. Valuations once justified by steady subscription growth are being recast as investors assess the possibility that AI could permanently shrink long-term revenue potential.
The selloff spilled into megacap tech as well. Microsoft slid about 10% after reporting a slowdown in cloud growth for the fiscal second quarter, on track for its steepest one-day drop since March 2020. The software giant also issued softer-than-expected guidance on operating margin for the fiscal third quarter.
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