Key Takeaways
- Dan Ives from Wedbush describes the software selloff as the most extreme market disconnect he’s witnessed in two decades
- The iShares Expanded Tech-Software Sector ETF has declined 19% year-to-date compared to a 0.4% drop in the S&P 500
- Market anxiety about AI replacing traditional software platforms appears exaggerated, according to Ives
- Established platforms including Salesforce, ServiceNow, and Workday should capture 30% of AI spending, Ives forecasts
- Recent Anthropic agent announcements may signal a turning point for software equities
Dan Ives, a leading analyst at Wedbush Securities, delivered a strong defense of software stocks during a Tuesday appearance at the Future Proof conference on CNBC. He characterized the current market dynamics as the most extreme disconnect he’s observed in the technology sector over the past 15 to 20 years.
The iShares Expanded Tech-Software Sector ETF has experienced a 19% decline in 2026. Meanwhile, the broader S&P 500 index has registered a minimal 0.4% loss during the same timeframe.
The analyst attributed the sector weakness to what he termed an “AI ghost trade.” According to Ives, market participants have dramatically overestimated the threat artificial intelligence poses to traditional software businesses.
“It’s ultimately software that the use cases from Salesforce to ServiceNow to ultimately cybersecurity is gonna protect the CrowdStrike, Palo Alto and others,” Ives said during the interview.
Ives maintains that established software platforms hold the genuine value proposition in artificial intelligence, rather than emerging pure-play AI ventures. His thesis centers on the installed customer bases and proprietary data accumulated by companies such as Salesforce, ServiceNow, Workday, and Oracle, which he views as the true infrastructure supporting AI’s commercial expansion.
Software Platforms Positioned to Capture AI Economics
Ives projects that software companies will ultimately receive 30% of total AI-related expenditures. He cited Palantir as a proof point demonstrating successful monetization strategies within this category.
The analyst highlighted recent product launches from Anthropic focusing on AI agents as a possible indicator that software stocks have reached capitulation levels.
“My whole point is that, yeah, is it gonna disrupt pure play software one trick pony, some vendors? But the reality is the data, the value, it’s in the stacks,” Ives said.
Ives anticipates increased merger and acquisition activity throughout the software industry as companies navigate challenging market conditions.
ETF Metrics and Technical Picture
The iShares Expanded Tech-Software Sector ETF maintains a market capitalization of approximately $10.88 billion. The fund trades at a price-to-earnings multiple of 41.43 and a price-to-sales ratio of 20.24.
Technical analysis reveals the ETF’s 50-day moving average at 92.27, positioned beneath its 200-day moving average of 105.22. This configuration indicates bearish momentum remains active.
With a beta coefficient of 1.3, the ETF demonstrates amplified volatility relative to the broader market. Current volatility measures register at 27.18.
The selloff has occurred while the ETF’s return on equity stands at 35.2%, and its Altman Z-Score of 20.35 indicates the portfolio companies maintain solid financial health.
Ives employed a vivid metaphor to illustrate his outlook: “Right now, the Miami cab driver is bearish in software, and I think that’s a bullish sign relative to where I see software this year.”
The iShares Expanded Tech-Software Sector ETF has delivered three-year revenue growth of 18.97% while maintaining a gross margin of 74.37%.
