Equity Strategy: Software, The Trade That's Fooling Everyone
What Markets Are Missing About AI and Software
Software: The Trade That’s Fooling Everyone
Over the last few weeks, “software” has gone from market darling to punching bag.
In this video, I walk through why that’s the wrong headline, how the market is actually repricing growth quality, and what that means for picking winners and losers inside the selloff – plus when these rotations are likely to stop dragging on the index.
Here is the chart deck and referenced articles from the video:
If you want to stop treating “software” as one trade and start separating compounders from capital‑destroyers, the full report below goes deeper on:
How to distinguish durable compounders from names that cannot fund growth or defend margins in a higher‑for‑longer regime
Which balance sheet, cash flow, and customer mix traits actually matter for software survival vs multiple compression
How to read the rotation signals that tell you when sector drags are likely to exhaust or flip from headwind to tailwind for the index
Specific software names and themes that look mispriced for this macro backdrop, with clear rotation and risk setups
Main Macro/Tech Ideas:
Software stocks just had their worst month since the 2008 financial crisis. IGV is down 22% from its highs. $1 trillion in market cap has been destroyed. Hedge funds have minted $24 billion shorting the sector. Jefferies is calling sentiment the "worst ever." JPMorgan says the sector is "being sentenced before trial." Bloomberg Intelligence says software is "radioactive."
And yet, the dominant narrative driving this carnage -- that AI is going to destroy SaaS -- is fundamentally wrong.
Here is how I am thinking about the software selloff and what it actually means for the broader market:
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