Software stocks fall as fear of AI disruption is back in full force

Software stocks plummeted Tuesday after an unspecified AI announcement reignited fears of industry disruption, dragging the iShares Expanded Tech-Software Sector ETF down 3.8% in afternoon trading. Circle Internet Group, UiPath, HubSpot, and SentinelOne led declines as the worst performers in the ETF, signaling investor concerns over AI rendering certain software use cases obsolete. The selloff pushed the ETF into negative territory for March, marking its first monthly loss after a period of relative stability in early 2026. The drop reflects broader market anxiety about AI’s accelerating impact on traditional software business models, particularly in automation and cybersecurity sectors. Analysts suggest the volatility underscores ongoing uncertainty about which companies will adapt to AI-driven shifts and which may face long-term obsolescence.