Software Sector Suffers Worst Quarterly Decline Since 2008 Amid AI Fears

The software sector has experienced its worst quarterly performance since 2008, with the iShares Expanded Tech-Software Sector ETF (IGV) plummeting by over 24% in the first quarter of 2026. This downturn has been attributed to concerns that advanced AI agents may make traditional enterprise software redundant. Companies like Salesforce Inc. (CRM), ServiceNow Inc. (NOW), and Workday have seen significant declines, with CRM and NOW dropping by over 30%, and Workday experiencing a staggering decrease of nearly 40%. In contrast, the broader market has remained relatively stable, leading to a widening performance chasm as capital shifted towards energy investments and AI-centric semiconductor producers.

Analysts such as Dan Ives contend that the downturn has been exaggerated, with major players being disproportionately affected. Ives argues that AI represents a transformative catalyst that will bolster expenditure across the enterprise software landscape. However, investor skepticism regarding imminent returns remains high due to persistent inflation and elevated interest rates.