Goldman Sachs warns that a software stock rout in 2026 could be just the beginning.
One need only look at how the rise of the internet hit the newspaper industry in the early 2000s for a taste of what the future might hold.
Goldman Sachs strategist Ben Snider said in a new report, “One lesson from historical examples of industries at risk of disruption is that stable stock prices require stable earnings prospects. For example, as the Internet grew in the early 2000s, newspapers faced the risk of technological disruption. Between 2002 and 2009, the group’s share price fell by an average of 95%.”
Snyder added, “The multi-year decline in newspaper stocks ended only when earnings expectations bottomed out, and the tobacco litigation hiatus followed a similar pattern. In this case, uncertainty about the ultimate impact of AI means that near-term earnings results will be an important signal of business resilience, but in many cases insufficient to refute longer-term downside risks.”
The news surrounding software stocks has been bad as investors try to gauge how much of the sector’s profits are at risk due to rapid advances in artificial intelligence.
The market fully believes that the terminal value of software companies such as Salesforce (CRM), Workday (WDAY), Thomson Reuters (TRI), SAP (SAP) and ServiceNow (NOW) is threatened by artificial intelligence.
Just look at Anthropic (ANTH.PVT), which launched a week ago and initially went unnoticed before sparking yet another software debacle. The artificial intelligence developer has launched a plug-in for its Claude Cowork agents that automates tasks such as legal, sales, marketing and data analysis.
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Shares of Thomson Reuters, LegalZoom.com (LZ), PayPal (PYPL), Expedia Group (EXPE), Equifax (EFX) and Intuit (INTU) all subsequently plummeted. The strong buy-on-the-dip mentality for these stocks has yet to materialize, and it’s unclear what positive catalysts could get investors interested again.
Software stocks are currently lagging the Nasdaq Composite Index (^IXIC) by the widest margin this century.
Big-name companies suffered heavy losses, led by Oracle (ORCL) and Salesforce, which saw their share prices fall 27%. Figma (FIG), which IPOed amid much hype in 2025, has seen its shares plummet 41% this year.
“The software industry is facing an increasingly pessimistic narrative, amplified by new releases of artificial intelligence that investors believe will disrupt software,” Evercore analyst Kirk Materne said.
“The common thread in almost every software downturn is that once a bottom is found, the industry tends to outperform the S&P,” he said. “The harder question is how much more pain remains before that is achieved, but there is no ‘magic bullet’ when it comes to transforming emotions.”