Concerns are mounting regarding the stability of stock markets, despite the S&P 500 and FTSE 100 currently appearing resilient. Underneath this façade of strength, significant issues loom, particularly within the software sector of the S&P 500, which has seen a steep decline of approximately 30% since October, a phenomenon now referred to as the ‘SaaSpocalypse.’
The tide has also turned against major players in the FTSE 100, with key data companies such as Experian, Sage, London Stock Exchange Group, and RELX suffering losses of 35% or more over the past year. This downward trend has drawn comparisons to the early days of the dotcom bubble decline in 2000, where tech stocks began to falter while other sectors remained buoyant temporarily. Analysts at Deutsche Bank have noted parallels, suggesting that the broader market may also succumb to declines as tech stocks did over two decades ago.
Investors are feeling the pinch, with portfolios bearing the brunt of the downturn. Companies like Axon Enterprise, known for its cloud solutions aimed at law enforcement, and gaming platform Roblox have encountered significant stress. Similarly, e-commerce software provider Shopify and language learning platform Duolingo have not been immune, while smaller companies like Salesforce and Cloudflare have also experienced a drop in value. Cybersecurity leader CrowdStrike has faced similar challenges.
Despite these difficulties, some investors maintain a level of optimism. A year ago, one investor highlighted the growing importance of assessing tech companies for their vulnerability to AI disruption, asserting that while AI could lead to value erosion, many firms may ultimately benefit from its advancements. This sentiment is echoed in opinions about companies like Shopify, Axon, CrowdStrike, and Cloudflare, which some believe have strong business models and competitive positions.
The sell-off has sparked opportunities for selective investments. A notable candidate is Sage, which has witnessed its stock decline more than 20% year-to-date, despite providing critical accounting and payroll software to over two million small and medium-sized enterprises (SMEs). There are concerns that AI advancements could prompt clients to switch to lower-cost solutions. However, the risk-averse nature of accountants in medium-sized firms suggests that they are unlikely to abandon established, compliant systems for untested AI options. Entrepreneurs, too, typically consult their accountants when modifying business practices.
Sage is also proactively addressing potential threats by launching its own AI assistant, Copilot, aimed at automating routine tasks such as invoice management and financial reporting. Their Q1 2026 organic revenue saw a 10% increase to £674 million, with North America experiencing even stronger growth at 13%. Despite the recent downturn, Sage’s forward earnings multiple of 15 for FY27 appears low for a company exhibiting such growth prospects, positioning it as a potential buy for those looking at opportunities within the FTSE 100.
As the market remains volatile, some investors remain committed to their positions, emphasizing the importance of patience and confidence in robust business strategies amidst uncertainty.
