Software stocks have faced notable market headwinds amid growing investor fears regarding artificial intelligence disruption.
The broader equity pullback is also raising concerns for Bitcoin (BTC), which has closely tracked software stocks.
Why Are Software Stocks Down?
According to the Global Markets Investor, the iShares Expanded Tech-Software Sector ETF (IGV) has fallen 15% in February alone, putting it on pace for its worst monthly performance since 2008. The ETF is now testing its April 2025 lows and sits roughly 35% below its peak.
“Software stocks are having their WORST month since the Great Financial Crisis,” the post read.
Artificial intelligence sits at the center of the recent drawdown, with investors selling shares of companies perceived as vulnerable to disruption by advancing AI tools. Two major developments in recent days have accelerated the downturn.
On February 20, Anthropic introduced “Claude Code Security,” a new capability embedded within Claude Code. The tool scans codebases for security vulnerabilities and recommends targeted patches for human review, aiming to detect and fix issues that traditional security tools may overlook.
The announcement triggered an immediate reaction across cybersecurity stocks. According to The Kobeissi Letter, CrowdStrike erased $20 billion in market value within two trading sessions. Furthermore, IBM shares fell more than 10%.
“The software selloff continues, w/cybersecurity stocks particularly hard hit following the release of Anthropic’s Claude Code Security due to fears that this code-focused tool will change the industry. This indicates that there is nowhere to hide when it comes to software stocks. Even the Goldman Sachs basket of supposedly AI-immune software stocks has come under heavy pressure recently,” said Holger Zschaepitz, Senior Editor at the Economic and Financial desk of the German daily Die Welt and its Sunday edition Welt am Sonntag.
Pressure intensified again on Monday after Citrini Research published a report. The report presents a hypothetical scenario set in June 2028 in which AI automation drives higher corporate profits.
At the same time, it models significant disruption to white-collar employment, weaker consumer demand, rising credit stress, and structural economic challenges.
“What follows is a scenario, not a prediction. The sole intent of this piece is modeling a scenario that’s been relatively underexplored. Hopefully, reading this leaves you more prepared for potential left tail risks as AI makes the economy increasingly weird,” the report read.
Following the report’s release, shares of delivery, payments, and software companies moved lower.
Rising Tech Volatility Tightens Grip on Bitcoin
The impact is not confined to traditional equity markets. Grayscale observed that Bitcoin’s price action closely mirrored US software stocks during the latest wave of selling.
Several market participants have highlighted the correlation between US software stocks and Bitcoin. This suggests that, rather than behaving as a hedge, Bitcoin has at times traded like a high-beta extension of the tech sector.
Thus, if software stocks continue to weaken, Bitcoin may also remain under pressure. Prolonged weakness in high-growth equities can contribute to tighter financial conditions through wealth effects, higher equity risk premia, increased volatility, and systematic deleveraging across high-beta assets, including cryptocurrencies.
However, a divergence remains possible. If investors begin to view Bitcoin as a monetary hedge against structural AI-driven labor disruption, currency debasement, or policy responses such as aggressive stimulus, its correlation with software equities could weaken.
