JPMorgan: software sell-off presents a buying opportunity

JPMorgan says the dramatic plunge in software stocks last week is a buying opportunity. The sell-off began after Anthropic unveiled new AI tools, wiped roughly $2 trillion of market capitalization and produced the sector's largest 12-month drawdown in more than 30 years, reducing its S&P 500 weight to 8.4% from 12%.

The bank gives five reasons to buy the dip. It argues that worst-case disruption scenarios look unlikely because enterprise software is deeply embedded and early evidence suggests AI is more likely to be additive to workflows than a substitute. It also notes that last week's selling pushed investor sentiment to deeply pessimistic levels and that a recent rotation toward hardware and semiconductors could reverse, drawing buyers back into software.

Positioning in the sector is at extreme lows: net exposure to software has fallen to the 1st percentile since 2018 while semiconductors sit at the 100th percentile, and short interest in software has increased as retail traders have soured on the sector.

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