The Software Stocks I’m Watching After the Sell-Off

I’ve been in this business long enough to know when fear reaches extreme levels that there is an opportunity.

That level of fear is exactly what we’re seeing in the software sector right now.

Over the last several weeks, SaaS (software as a service) stocks have been hit hard, wiping out hundreds of billions of dollars in market value and leaving a lot of investors wondering if the software stocks are dead money.

What we’re seeing right now in SaaS and enterprise software feels violent. Stocks that were market darlings not long ago are suddenly down 20%, 30%, even more in a matter of weeks.

But before we jump to that conclusion, let’s slow this down and put it in context.

The software sector is going through what I like to call a forced reset. A broad sell-off driven less by collapsing fundamentals and more by a sudden shift in narrative. Over the last several weeks, hundreds of billions of dollars in market value have been wiped out across software and SaaS names as investors reassess growth, margins, and most importantly, the impact of artificial intelligence (AI).

That last part is key.

For the past year, AI was treated as an automatic tailwind. If a company whispered “AI” on an earnings call, the stock went higher. Now, the market is asking a much tougher question: Does AI help this company… or does it replace it? And when markets start asking existential questions, they don’t wait for perfect answers. They sell first.

What makes this sell-off uncomfortable is how indiscriminate it’s been. High-quality software companies with strong balance sheets, sticky customers, and recurring revenue streams are getting hit right alongside weaker, more speculative names. That’s usually a sign of emotion taking over.

I’ve been through enough cycles to recognize this pattern. Software tends to experience these “forest fire” moments every decade or so. Valuations creep too high. Expectations get stretched. A new technology changes the conversation. And suddenly the market clears out excess in a hurry. It’s painful in real time, but historically it’s also where future leadership is born and investment opportunities arise.

Here’s what I’m not seeing: a collapse in enterprise demand. CIOs aren’t ripping out mission-critical software. Businesses aren’t abandoning digital workflows. And IT budgets aren’t going to zero overnight. What is happening is a repricing of long-term growth in a world where AI changes how value is captured.

That’s a big difference.

Some software companies will struggle. Pricing power may weaken. Margins may compress. But others will adapt - embedding AI directly into their platforms, increasing productivity for customers, and actually strengthening their competitive position. The market, right now, isn’t distinguishing very well between the two.

And that’s where opportunity eventually comes from.

I’m not saying this is the bottom. I’m not rushing to “back up the truck.” But I am paying close attention. When fear starts to override nuance, and when quality gets sold alongside speculation, that’s when long-term investors should lean in - not emotionally, but analytically.

It feels like a transition.

And transitions are where money is made - if you’re patient, selective, and willing to think beyond the next headline.

So instead of reacting emotionally, this is where I shift into observation mode. I’m not trying to catch every bounce, and I’m not throwing darts. I’m building a watchlist of high-quality software companies that already sit at the center of enterprise workflows - businesses with real customers, real cash flow, and a clear path to integrating AI rather than being displaced by it.

These aren’t trades. They’re companies I want to be patient with as the dust settles, valuations reset, and the market starts to separate true long-term winners from the noise.

Salesforce (CRM) – The backbone of enterprise customer data, with a massive installed base and AI tools that can enhance pricing power rather than erode it.

ServiceNow (NOW) – Mission-critical workflow software embedded deep inside corporate operations, making it far more resilient than most SaaS names during periods of disruption.

Adobe (ADBE) – A dominant creative platform with unmatched brand and ecosystem strength, now using AI to expand its moat instead of racing to defend it.

Autodesk (ADSK) – Essential design and engineering software tied to long-term infrastructure, manufacturing, and construction trends where demand doesn’t disappear overnight.

Here’s to your future,
Matt McCall
Founder, NXT Wave Research