Software Stocks Struggle at Start of 2026
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 11 2026
0mins
Source: Fool
- Industry Weakness: As of now, the iShares Expanded Tech-Software ETF has dropped 20% this year, indicating a weak performance in the software sector, significantly lagging behind the stable performance of the S&P 500 and Nasdaq Composite, reflecting a lack of confidence in software stocks.
- Accelerating Infrastructure Spending: Major tech companies like Microsoft, Google, and Amazon have collectively invested hundreds of billions in AI infrastructure over the past three years, with forecasts suggesting hyperscalers will exceed $500 billion in infrastructure budgets by 2026, although analysts express skepticism about the sustainability of this spending pace.
- Valuation Pressure: Palantir Technologies boasts a forward price-to-sales ratio nearly double that of its peers, and despite its impressive growth profile, the high valuation places immense pressure on the company to deliver exceptional quarterly earnings, making any misstep likely to trigger severe sell-offs.
- Threat to Traditional Models: The rise of large language models poses a challenge to traditional SaaS models, as these models can integrate with existing enterprise software platforms to enhance data processing efficiency, leading investors to worry about the future of software stocks.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 399.760
Low
500.00
Averages
631.36
High
678.00
Current: 399.760
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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