It’s no secret that the software sector has had a catastrophic start to 2026.
Fears of disruption from AI innovations like Anthropic’s Claude Code, and high valuations entering the year have led to a bloodbath among software-as-a-service (SaaS) stocks.
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Through April 10, the iShares Expanded Tech-Software Sector ETF (NYSEMKT: IGV), which tracks top software stocks like Microsoft, Palantir, and Oracle, was down 30%, while the S&P 500 was basically flat.
However, the SaaS sector was flying higher on Monday, nearly across the board, with the IGV up more than 4%, even as the broad market was basically flat as investors reacted to President Trump’s threat to block the Strait of Hormuz.
There wasn’t any obvious catalyst for the turnaround, but a note from Goldman Sachs might have triggered a rotation into the sector.
In an article published Friday, Goldman Sachs identified a “value opportunity” in the tech sector. Goldman’s upgrades and downgrades often move stocks significantly, as the investment bank is arguably the most influential market prognosticator, so it wouldn’t be surprising for the article to do the same.
Peter Oppenheimer, the chief global equity strategist at Goldman Sachs Research, said, “The underperformance of the technology sector is starting to generate attractive opportunities for investors as its valuation, relative to expected consensus growth, has fallen below that of the global aggregate market.”
Goldman also observed that net debt to equity ratios remain significantly lower than the rest of the stock market, and that the premium on software stocks has fallen to its lowest level in roughly a decade.
Meanwhile, the valuation premium on the five biggest technology stocks, the heart of the “Magnificent Seven,” is nearly even with the market, and the tech sector’s P/E ratio is now below consumer staples and industrials, even though it’s still expected to grow much faster.
Investor sentiment is impossible to predict, and the level of fear around software stocks seems especially high. Earlier this year, a blog post from Citrini Research that was essentially a thought experiment about the threat from AI was enough to cause software stocks to plunge, and seemingly every new model release from Anthropic does the same, including last week, when it said its Mythos model was so powerful and disruptive to security that it wouldn’t release it. Cybersecurity stocks tumbled on the news.
