Zacks Investment Ideas feature highlights: Intuit, iShares Expanded Tech-Software Sector ETF, Salesforce, Adobe, ServiceNow

Software stocks are under heavy pressure as AI-disruption fears drive a sector-wide repricing; Intuit is down about 63% from its highs, Salesforce about 39%, ServiceNow about 58%, Adobe about 60%, and IGV fell more than 24% in Q1 2026. Despite this, the article notes resilient fundamentals, with revenue growth around 10% to 20%+, but valuations have compressed to roughly 11x-14x forward earnings and short interest is at record levels. Intuit beat Q3 estimates and raised guidance, yet the stock still dropped roughly 20% after announcing a 17% workforce reduction and weaker TurboTax Standard demand.

Analysis

The market is not really pricing a near-term earnings collapse; it is pricing a regime shift in software distribution. That matters because if the AI threat is mostly a packaging and workflow-layer issue, the first losers are the higher-multiple, lower-retention names and the first winners are the platforms already sitting inside enterprise control points with data, identity, and permissions. In that setup, CRM and NOW have a cleaner path to defend spend than point solutions, while GOOGL and NVDA benefit from the same fear trade through compute demand and model-layer usage, even if software multiples keep compressing.

The second-order effect is that management teams across the group will likely respond by accelerating buybacks, headcount rationalization, and bundling AI features into core subscriptions, which can stabilize reported earnings faster than revenue. That creates a short-window squeeze risk for the crowded short base over the next one to three quarters, especially into earnings beats or raised guides. The biggest vulnerability is not immediate displacement, but a prolonged digestion period where growth stays intact while multiple compression continues because investors refuse to pay software-duration premiums.

The consensus may be underestimating how much of the selloff is flow-driven and how little fundamental deterioration has actually shown up in the largest platforms. If the market is wrong, the rebound will likely be violent rather than linear because positioning is already extreme and valuation has moved into a recession-like discount regime. If the market is right, the damage will show up first in lower-end SMB and creative workflows, making INTU and ADBE more exposed than CRM or NOW on a 6-12 month horizon.

Key Decisions for Investors

• Go long CRM vs. short ADBE on a 3-6 month horizon: CRM has the cleaner AI monetization narrative and stronger balance-sheet optionality, while ADBE is more exposed to AI-native feature commoditization; target 1.5-2.0x relative outperformance if software multiples stabilize.
• Initiate a tactical long in NOW into earnings/print windows only after confirmation of RPO acceleration; use a 5-8% trailing stop because the stock can re-rate sharply if guidance loses momentum, but upside to prior multiples is substantial if growth remains >20%.
• Buy INTU downside puts or a put spread 3-6 months out rather than shorting outright: the name is vulnerable to slow-burn product disruption and SMB weakness, but the current valuation already reflects a lot of bad news; structure for convexity, not linear downside.
• Use IGV as a sector beta hedge against single-name longs only if the goal is to neutralize factor risk; otherwise avoid broad short exposure because the crowded short book makes the ETF prone to sharp bear-market rallies on any AI monetization headline.
• Add GOOGL and NVDA as second-order beneficiaries on multi-quarter timeframes: both should capture incremental wallet share from AI adoption even if enterprise software spend is delayed, with better risk/reward than shorting software into an already extreme positioning setup.