Software stocks have faced significant challenges this year, but signs of recovery may be on the horizon for investors in this sector. Jonathan Krinsky, the chief market technician at BTIG, has observed a noteworthy rebound in the iShares Expanded Tech-Software ETF (IGV) regarding its relative strength index (RSI). Currently, the RSI stands at 46, a significant increase from a previous low of under 20 earlier in 2026.
The ETF recently dipped below the $77 threshold but is now trading around $80, suggesting a potential turnaround. Krinsky noted that the brief drop below $77 lasted only two days, and with the ETF regaining support at that level on strong trading volume, he advised clients against maintaining short positions in the group at this time.
Historically, the software sector has been a favorite among Wall Street investors. The IGV soared by 59% in 2023, followed by another 23% increase in 2024, and managed almost a 6% rise last year. However, 2026 has not been as kind; the fund is down 24%, reflecting growing concerns that advancements in artificial intelligence could threaten the viability of traditional software solutions by offering similar functionalities at lower costs.
Last week, the ETF saw a sharp decline of 7% when Anthropic, an AI platform, reported a dramatic increase in its revenue run rate, climbing to over $30 billion from $9 billion at the end of the previous year. Despite these challenges, Krinsky remains optimistic, highlighting that “there is clearly a bottom in place” and suggesting that managing risk based on recent lows could be a prudent strategy for investors moving forward.
