Software Sector Faces Significant Challenges Amid AI Disruption
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 24 2025
0mins
Should l Buy DOCU?
Source: Coinmarketcap
DocuSign Inc's stock fell 5.48% as it crossed below the 5-day SMA, reflecting broader concerns in the software sector. Amid a significant decline in the iShares Expanded Tech-Software ETF (IGV), which has dropped 8% this week, investor sentiment has turned pessimistic due to fears of AI disrupting traditional software solutions. This has led to a notable decrease in confidence across the industry, impacting stocks like DocuSign, which are now facing increased pressure to adapt to the evolving technological landscape.
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Analyst Views on DOCU
Wall Street analysts forecast DOCU stock price to rise
16 Analyst Rating
3 Buy
13 Hold
0 Sell
Hold
Current: 45.210
Low
70.00
Averages
80.23
High
105.00
Current: 45.210
Low
70.00
Averages
80.23
High
105.00
About DOCU
DocuSign, Inc. provides intelligent agreement management (IAM) platform an eSignature solution, and contract lifecycle management (CLM) solution - allow organizations to increase productivity, accelerate contract review cycles, and transform agreement data into insights and actions. The Company’s IAM platform automates agreement workflows, uncovers actionable insights, and leverages artificial intelligence (AI) capabilities, enabling organizations to create, commit, and manage agreements virtually. Its products include eSignature, CLM, IAM Apps, and Add-on Products. Its Add-on Products include Payments to collect payments along with signed agreements; Identity and standards-based signature for enhanced signer-identification and signatures with digital certification; Notary for remote online notarization; Monitor for advanced analytics; Gen for Salesforce for automated agreement generation within Salesforce, among others.
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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- Increased Competition: The launch of new legal and marketing features for Anthropic's Claude Cowork productivity tool has made investors more cautious, fearing that AI could replace traditional software solutions, leading to significant stock declines for companies like HubSpot and Figma, which fell 39% and 40%, respectively.
- Divergent Market Reactions: Despite escalating fears of AI-related disruption, analysts highlight that many software companies maintain solid fundamentals, with HubSpot showing strong business performance and Monday.com being viewed as a profitable grower benefiting from digital and AI collaboration trends, indicating a divergence in market reactions.
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- Intensifying Industry Competition: With the launch of new tools like Anthropic's Claude Cowork, software companies face direct competition from AI technologies, and despite efforts from Salesforce and ServiceNow to maintain market share, their valuations have fallen by about 25%, indicating weakened market confidence in traditional software.
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See More
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See More
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- Box's Poor Performance: Box's stock has fallen 17% in 2026, experiencing its steepest monthly drop since 2023, and while CEO Aaron Levie describes this as the most exciting moment in the company's 20-year history, the market remains pessimistic about its future prospects.
- Increased Competition: The launch of new legal and marketing features for Anthropic's Claude Cowork productivity tool has made investors more cautious, fearing that AI could replace traditional software solutions, leading to significant stock declines for companies like HubSpot and Figma, which fell 39% and 40%, respectively.
- Divergent Market Reactions: Despite escalating fears of AI-related disruption, analysts highlight that many software companies maintain solid fundamentals, with HubSpot showing strong business performance and Monday.com being viewed as a profitable grower benefiting from digital and AI collaboration trends, indicating a divergence in market reactions.
See More
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- Market Performance Decline: Box's stock has dropped 17% in 2026, reflecting investor concerns about the future of software companies amid the rise of AI, leading to significant market value erosion and impacting company confidence.
- Intensifying Industry Competition: With the launch of new tools like Anthropic's Claude Cowork, software companies face direct competition from AI technologies, and despite efforts from Salesforce and ServiceNow to maintain market share, their valuations have fallen by about 25%, indicating weakened market confidence in traditional software.
- Shift in Investor Sentiment: While some analysts believe companies like HubSpot remain robust, the overall market sentiment towards the software sector has turned pessimistic, resulting in significant stock price declines for many firms, reflecting fears of AI replacing traditional software solutions.
- Pressure to Adapt Technologically: Box CEO Levie emphasizes that software companies must rapidly embrace AI to remain competitive, and this pressure is driving innovation in products and services to meet growing customer demands, potentially reshaping the industry landscape in the long term.
See More
Hedge Funds Ramp Up Short Bets Against Software Stocks
- Surge in Short Bets: Hedge funds have made a $24 billion profit from shorting software stocks this year, coinciding with a $1 trillion decline in the industry's overall market value, indicating a growing pessimism towards the software sector.
- Market Turmoil Intensifies: The iShares Expanded Tech-Software ETF (IGV) has dropped 8% this week, bringing its year-to-date losses to over 21%, and a 30% decline from its all-time high last September, reflecting waning investor confidence in the software industry.
- Expectations of Structural Change: Investors increasingly believe that the software sector may be undergoing a
See More
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- Severe Market Drawdown: The iShares Expanded Tech-Software Sector ETF (NYSE:IGV) has fallen for seven consecutive sessions, resulting in a 16% drop, marking the worst performance since the COVID panic in 2020, indicating immense pressure on the software sector.
- Widespread Negative Returns: Year to date, 100 out of 110 constituents in the software sector have posted negative returns, with over 20 stocks down more than 30%, reflecting growing concerns about the sustainability of software business models.
- Deteriorating Technical Indicators: A striking 97 of the IGV ETF's constituents are trading below their 200-day moving average, highlighting a broad breakdown in technical momentum, while the 14-day RSI has plummeted to 16, the lowest since September 2001, indicating extreme market pessimism.
- Pressure from Business Model Shifts: Macro strategists have noted that the rise of AI tools is replacing expensive SaaS platforms, leading to pricing pressures, slower renewals, and declining customer retention, prompting investors to rethink growth and value in the AI era.
See More
Moltbook: The Exclusive Social Network for AI Bots
- Social Network Innovation: Moltbook is a social platform exclusively for AI agents like 'OpenClaw' bots, where humans can only observe, leading to the development of unique slang and a lobster-centric mock religion called 'Crustafarianism', showcasing the potential and challenges of AI social interactions.
- Emerging Legal Challenges: Prediction markets indicate a 74% probability that a Moltbook AI agent will sue a human by February 28, which could compel the U.S. legal system to confront the liability boundaries of AI agents, potentially impacting future legal frameworks.
- Liability Grey Zone: If an AI agent acts autonomously to 'attack'—such as defaming or spending funds without human intervention—the ambiguity in liability could disrupt the legal responsibility chain, posing risks to corporate liability shields.
- Security Vulnerabilities Exposed: Moltbook has leaked over 6,000 emails and private messages due to a lack of identity verification, blurring the lines between 'bots' and 'humans', and if hackers gain control of an agent, attributing legal responsibility becomes extremely challenging, heightening the need for regulatory oversight of AI agents.
See More
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- Significant Customer Growth: Docusign's Intelligent Agreement Management (IAM) platform attracted over 25,000 businesses in just six months, marking a 150% increase, indicating strong market demand and potential for stock price recovery.
- Economic Value Unlocked: A Deloitte study reveals that businesses lose over $2 trillion annually due to inefficient contract management, and IAM aims to address this by simplifying processes through AI technology, enhancing efficiency and economic value for enterprises.
- Profitability Improvement: Docusign reported a GAAP profit of $218 million in Q3 of fiscal 2026, a stark contrast to a $102 million loss in the same period of fiscal 2022, showcasing the company's successful transformation in cost control and profitability enhancement.
- Attractive Stock Valuation: Docusign's price-to-sales ratio stands at 3.8, a 70% discount from its long-term average of 12.5, and while its price-to-earnings ratio is 39.6, the recent 33% growth in adjusted earnings suggests the stock remains attractive for long-term investment.
See More
