US software stocks tumble sparks concerns that AI trade is reshaping markets

Core Viewpoint - The recent decline in the software and services industry raises concerns that the artificial intelligence boom may be altering market dynamics, leading to questions about the sustainability of technology stock investments [1] Group 1: Market Reaction - Financial markets experienced a significant downturn as global software stocks fell due to fears that rapidly advancing AI tools could disrupt traditional business models [2][3] - Despite a 2% rebound in the broader market, the outlook for U.S. software stocks remains uncertain, with options market participants on high alert for potential further declines [2] Group 2: Performance Metrics - Software and services stocks have underperformed against the S&P 500, lagging by nearly 24 percentage points over the past three months, marking one of the worst gaps in three decades [4] - The current selloff is comparable to historical downturns, including the dot-com crash of 2000-2001, where the spread fell below negative 25 [5] Group 3: Individual Stock Performance - Many U.S. software stocks have experienced significant losses since the S&P technology sector peaked in late October, with Oracle losing nearly 50% and ServiceNow and AppLovin each dropping over 40% [6]