Software Stocks Have Been Hit Hard, but Jefferies Still Likes This 1 Stock

Software stocks have not had it easy this year. The application software space, once the market’s steady compounder, has taken a sharp hit. Many of these names are down 30% to 55% year-to-date (YTD) – a steeper slide than the broader software pack, with the iShares Expanded Tech-Software Sector ETF (IGV) off around 27.2%. Clearly, investors are reassessing what growth really looks like in an artificial intelligence (AI)-first world.

That shift in mood prompted Jefferies analysts led by Brent Thill to take a step back and reassess the space. The team applied a new AI Risk Matrix, examining factors such as customer mix, competitive positioning, proprietary data advantages, and pricing models. Their conclusion was cautious: the market faces “further risk of AI disruption,” and selectivity is now critical. Several stocks were moved to “Hold” as risks and sentiment pressures linger.