Software Stocks Enter Bear Market Amid AI Concerns
The S&P North American Technology Software Index has declined by 30% from its peak, entering bear market territory, impacted by fears that artificial intelligence (AI) could disrupt the software industry. Major companies like Microsoft, Datadog, AppLovin, Atlassian, and HubSpot have seen significant drops, with losses ranging from 24% to 73%.
Nvidia CEO Jensen Huang characterized the stock declines as “the most illogical thing in the world,” asserting that AI will not replace existing software but will instead complement it. Huang emphasized that many software companies are currently undervalued, making them attractive investment opportunities despite the prevailing market negativity.
Notable price movements include Microsoft, down 27% but trading at 26 times earnings after a 160% increase in paid AI copilots; Datadog, down 47% at 53 times earnings; AppLovin, down 52% at 45 times earnings; Atlassian, down 70% at 22 times earnings; and HubSpot, down 73% at 25 times earnings. Analysts suggest that while stocks may continue to decline in the near term, they could offer good prospects for long-term investors.
