Hey Income Traders,

$2.19 Billion Has Left Software Stocks, And the Bleeding Isn't Over

iShares Expanded Tech-Software Sector ETF (IGV) just shed another four percent. That brings the software sector benchmark down 30 percent from its September highs, with $2.19 billion in net outflows over the past year.

Here's what makes this interesting: last week, $1.5 billion flooded back into IGV over two sessions.

Traders bought the dip aggressively, convinced the selling was overdone. The chart didn't care. It kept falling. That $1.5 billion in fresh money is now trapped above, and those buyers are about to become fuel for the next leg down.

Why This Breakdown Has Legs

Despite that massive inflow surge, IGV hasn't recovered. It's testing the $77-80 zone (its 52-week low is $76.68). When big money flows in and price doesn't respond, it tells you something: selling pressure is overwhelming the buying.

IGV broke below its 50-day moving average weeks ago, then the 200-day. The death cross triggered on January 15th. The RSI hit 23 (deeply oversold), yet price keeps making new lows. When oversold conditions don't produce bounces, the trend is overwhelming the technicals.

The Structural Story: This Isn't a Pullback

Wall Street's calling it the "SaaSpocalypse," and for once, the dramatic name fits.

Here's the core thesis: Agentic AI is compressing seats. When 10 AI agents can do the work of 100 sales reps, you don't need 100 Salesforce (CRM) seats anymore. You need 10. That's a 90 percent reduction in seat revenue for the same work output.

The per-seat SaaS model (the entire foundation of software valuations for the past decade) is being structurally challenged. Forward earnings multiples for software have collapsed from 39x a year ago to 21x today.

Even companies beating earnings are getting punished. ServiceNow (NOW) dropped 11 percent despite beating for the ninth straight quarter. Microsoft (MSFT) shed $360 billion in market cap in a single day after reporting solid numbers.

Bottom Line

The software sector isn't experiencing a normal correction. It's undergoing a structural repricing as the market digests:

#1 what agentic AI means for per-seat revenue models (not good things)

#2 agentic tools that help you create your own customized, powerful software for very little money and with little effort.

Now… we can't paint every software company with the same brush but make no mistake – an extinction comet just hit a whole group of companies, and if $76.68 breaks, the fresh money may become fuel for the next leg down. I’m going to be adding 0DTE puts when that happens – not too early, not too late – and it’s going to print.

For an example of how to think of how disruptive this stuff is….

May the income be with you,

Hans