A ServiceNow Inc. sign during the Nvidia GPU Technology Conference on March 20, 2025 in San Jose, California.
David Paul Morris | Bloomberg | Getty Images
Software stocks fell further on Thursday, continuing a sharp decline this year as growing concerns that artificial intelligence could upend many companies’ business models drove investors away from the sector.
The iShares Expanded High-Tech Software Sector ETF (IGV) fell about 5% in morning trading, its biggest single-day decline since last April during the tariff-induced economic downturn. The fund is currently down about 21% from its recent high, pushing the software industry into bear market territory and highlighting how quickly Wall Street’s sentiment toward one of its once-popular industries is changing.
Month-to-date, IGV is down about 14%, the worst pace since October 2008, when the fund fell 23%.
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iShares expands technology and software sector ETF in one year
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ServiceNow Someday
“Good, but not good enough,” Morgan Stanley analysts said in a note in the ServiceNow report. “In an environment of increasing investor skepticism toward incumbent application vendors, steady growth in line with expectations is likely not enough to change the narrative.”
Pressure is building 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 steadily increasing subscription costs are being reassessed as investors assess the possibility that AI will permanently reduce long-term revenue potential.
The decline also spilled over into mega-cap tech stocks. Microsoft fell about 10% after reporting slowing cloud growth in its fiscal second quarter, marking its steepest one-day decline since March 2020. The software giant also announced a weaker-than-expected outlook for its fiscal third-quarter operating margin.
Investor fears are amplified by the rapid pace of AI development itself. Anthropic released Claude Opus 4.5 late last year. This is the third major model launch in just two months. The company says the model is excellent at assisting with coding, computer operations and complex enterprise tasks, and ideal users include professional software developers and knowledge workers such as financial analysts, consultants and accountants.
