U.S. Software Stock Sell-Off Triggers ETF Concerns
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 4h ago
0mins
Source: Benzinga
- Sell-Off Impact: The sell-off in U.S. software stocks led the iShares Expanded Tech-Software Sector ETF (IGV) to decline by about 5% on Thursday, marking one of its largest one-day drops since the pandemic began, indicating investor concerns about the software industry's core business model.
- Cloud Spending Sensitivity: IGV's heavy exposure to enterprise software giants like Microsoft (MSFT) and Oracle (ORCL) makes it particularly sensitive to shifts in cloud spending expectations, highlighting growing doubts about AI monetization capabilities.
- Broad Market Reaction: The Technology Select Sector SPDR ETF (XLK) also fell roughly 2%, demonstrating how megacap software names can influence overall tech performance, as investors reassess the health of the software industry rather than merely rotating trades.
- Long-Term Re-Rating Expectations: The simultaneous declines across IGV, XLK, XSW, HACK, and AOTS suggest that the market may be pricing in more profound fundamental changes rather than just short-term earnings hiccups, with software ETFs becoming a testing ground for how AI reshapes demand.
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Analyst Views on APP
Wall Street analysts forecast APP stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for APP is 763.44 USD with a low forecast of 650.00 USD and a high forecast of 860.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
20 Analyst Rating
17 Buy
3 Hold
0 Sell
Strong Buy
Current: 569.240
Low
650.00
Averages
763.44
High
860.00
Current: 569.240
Low
650.00
Averages
763.44
High
860.00
About APP
AppLovin Corporation is a marketing platform. The Company provides end-to-end software and artificial intelligence (AI) solutions for businesses to reach, monetize and grow their global audiences. Its advertising solutions include a comprehensive suite of tools including AppDiscovery, MAX, Adjust, Wurl and Axon Ads Manager. AppDiscovery is powered by AXON, its AI-powered advertising engine, and matches advertiser demand with publisher supply through auctions at vast scale and at microsecond-level speeds. MAX is its monetization solution, utilizing an advanced in-app bidding technology that optimizes the value of a publisher’s advertising inventory by running a real-time competitive auction, driving more competition, and higher returns for publishers. Adjust is its measurement and analytics marketing platform which provides marketers with the visibility, insights, and data needed to scale their apps marketing and drive more informed results. Wurl is its connected TV (CTV) platform.
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.
U.S. Software Stock Sell-Off Triggers ETF Concerns
- Sell-Off Impact: The sell-off in U.S. software stocks led the iShares Expanded Tech-Software Sector ETF (IGV) to decline by about 5% on Thursday, marking one of its largest one-day drops since the pandemic began, indicating investor concerns about the software industry's core business model.
- Cloud Spending Sensitivity: IGV's heavy exposure to enterprise software giants like Microsoft (MSFT) and Oracle (ORCL) makes it particularly sensitive to shifts in cloud spending expectations, highlighting growing doubts about AI monetization capabilities.
- Broad Market Reaction: The Technology Select Sector SPDR ETF (XLK) also fell roughly 2%, demonstrating how megacap software names can influence overall tech performance, as investors reassess the health of the software industry rather than merely rotating trades.
- Long-Term Re-Rating Expectations: The simultaneous declines across IGV, XLK, XSW, HACK, and AOTS suggest that the market may be pricing in more profound fundamental changes rather than just short-term earnings hiccups, with software ETFs becoming a testing ground for how AI reshapes demand.
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Software Stocks Face Worst Month Since 2008
- Market Reaction: The iShares Expanded Tech-Software Sector ETF (NYSE:IGV) is on track for its steepest monthly drop since October 2008, with a roughly 6% plunge in a single session on Thursday, indicating investor concerns over traditional business models.
- Microsoft's Stock Plunge: Despite Microsoft exceeding Wall Street expectations in its latest earnings report, its stock fell over 12% due to slowing Azure cloud growth and cautious guidance, marking its worst day since the lockdown, reflecting worries about AI monetization durability.
- Analyst Perspective Shift: Thomas Shipp from LPL Financial raised the question of whether software can survive AI, suggesting that the sector's fundamentals are changing, and software companies will need to offer AI enhancements to maintain market share moving forward.
- Pessimistic Demand Outlook: Jordi Visser from 22V Research warned that markets are nearing a significant inflection point, shifting from a cloud-centric software cycle to a physical-world infrastructure cycle, with AI potentially suppressing software demand and altering long-term investor expectations.
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