MarketMoodz
AI Fears Hit Software Stocks; Citi Sees Buying Opportunity as IGV Falls in 2026
AI fears have pressured software stocks this year, pushing the IGV lower. Citi argues the weakness could unlock buying opportunities across names that meet its earnings-momentum screen as AI volatility persists.
Key Takeaways
- IGV is down more than 20% in 2026 and over 8% in February.
- Citi's Feb. 9 screening criteria target Russell 3000 software/services names ≥$2B market cap that are down more than 10% in the past month and show improving 2025–2027 EPS revisions.
- Microsoft and Palantir appear on Citi's buy list; Goldman Sachs and Wedbush have also named Microsoft.
- Anthropic launched Claude Cowork tools for legal, finance and product marketing in early February, intensifying AI-related sell-off.
People Involved
- No specific individuals mentioned
Entities Involved
- iShares Expanded Tech-Software Sector ETF (IGV) Benchmark software index ETF
- Anthropic AI company behind Claude Cowork tools
- Palantir Technologies, Inc. Enterprise software company; earnings beat and guidance
- Microsoft Corp. Blue-chip software/AI company on Citi’s buy list
- Citi Research Investment bank that issued the February 9 note screening software names
MarketMoodz Analysis
The Citi note argues that the AI-driven pullback in software shares may be more about fear than fundamentals. By focusing on mid-to-large-cap software and services names with a market cap of at least $2 billion and improving 2025–2027 consensus EPS revisions, the screen identifies names that could rebound as earnings momentum catches up with multiple expansion. In other words, the strategy looks for de-risked earnings trajectories rather than screens built on price action alone.
Historically, AI-induced volatility has produced abrupt drawdowns followed by rebounds when earnings visibility and product cycles reassert themselves. Citi’s emphasis on earnings revisions as a catalyst—rather than purely technical signals—aligns with a broader market pattern: sentiment shifts precede, but do not guarantee, fundamental upside. Investors should watch for a tightening, not just a re-rating, in cloud, cybersecurity, and enterprise software names as revisions firm up.
Source: Original Article
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