AI Revolution Shakes Tech Stocks: Is It Time to Invest?
Recent trends in software stocks have generated intense discussions among analysts and investors. As of February 19, significant declines have been noted in major tech stocks, raising questions about future investment opportunities.
Current State of Software Stocks
Software shares are experiencing a notable downturn. For instance, Microsoft has seen its stock drop by 28% from its peak last fall. Similarly, Oracle’s shares are down 55% from their record high in late 2025, while Salesforce has lost 27% of its value this year.
Understanding the Selloff
Analysts have proposed various explanations for the software selloff. Concerns exist that artificial intelligence (AI) could render many software products obsolete. Alternatively, some believe that software firms have over-invested in AI technology without clear returns.
- Microsoft: Down 28% from peak
- Oracle: Down 55% from record high
- Salesforce: Down 27% this year
The S&P Software & Services index, which tracks software stocks, has seen a decline of nearly 20% in 2026. Meanwhile, the broader tech-heavy Nasdaq index has fallen by only 2.4% year to date. This shift is particularly surprising given the strong performance of software stocks prior to this downturn.
The AI Revolution Impact
The so-called AI revolution began around November 2022 with the emergence of ChatGPT, a conversational AI tool. Initially, this innovation was celebrated as a means to boost productivity across the tech landscape.
However, as the market matured, concerns grew that success would skew towards a select few companies, diminishing opportunities for others. The fear of an ‘AI bubble’ has led to a broader retreat from technology stocks.
Emerging Trends in Software Development
A notable development is the rise of “vibe coding” facilitated by AI technologies. Products like Anthropic’s Claude Code allow users without programming backgrounds to create software tailored to their needs. This phenomenon has led to fears regarding the sustainability of traditional software companies.
- Vibe Coding: AI tools enabling non-coders to develop software
- Concerns: Potential disruption of the software industry by AI
Future Outlook for Investors
With falling prices, investors are questioning whether now is a good time to invest in software companies. The uncertainty surrounding when the selloff will stabilize remains high.
Analysts’ Perspectives
Experts suggest that while this situation may persist, it doesn’t necessarily indicate an imminent crisis for major players like Microsoft. Many analysts consider Microsoft a strong investment even at a 28% discount from its peak.
Investors are advised to remain cautious. The extraordinary returns seen from software companies in the past may not be replicated over the next decade. Adjusting expectations in this evolving landscape is essential for making informed investment choices.
