- Growing AI fears have recently sparked a sharp selloff in software stocks
- SaaS valuations fell as talk of disruption gained momentum
- AWS’s revenue growth has outpaced the performance of the broader tech market, and the CEO seeks to allay fears
Tech stocks have struggled in 2026 as investors reassess the business impact of rapidly evolving AI tools.
The decline has been particularly pronounced among software-as-a-service companies, where some analysts now describe the downturn as a “SaaS apocalypse.”
The iShares Expanded Tech-Software Sector ETF has fallen about 24% this year, marking one of its weakest performances since 2022.
Investors react to AI shockwaves
This sale follows a wave of new AI features released by leading model developers, including OpenAI and Anthropic.
Investors appear concerned that AI systems could squeeze margins, reduce demand for traditional subscription products or shift spending to infrastructure providers rather than application providers.
The market’s reaction suggests that expectations of disruption are being priced in aggressively, even as the company’s financial results remain relatively stable.
Amazon Web Services CEO Matt Garman has publicly stated that the market response may be disproportionate.
“Look, my own opinion is that a lot of this fear is overblown,” Garman told CNBC, because customers will need more and more computing power and infrastructure regardless of how they integrate AI into their operations.
According to Garman, companies can build their own systems, rely on SaaS providers or combine both approaches, but the underlying demand for cloud capacity is expected to increase.
Amazon recently reported that AWS revenue rose about 24% year over year to $35.6 billion in the fourth quarter, beating analyst estimates. Its operating margins reached 35%, up slightly compared to the previous quarter.
These figures suggest that spending on cloud infrastructure has not slowed alongside the broader decline in equity.
Some large software companies have introduced AI-based features without experiencing a dramatic acceleration in revenue growth.
ServiceNow reported fourth-quarter revenue growth of 20.7%, up from nearly 26% two years earlier.
This slowdown does not necessarily indicate deterioration, but it has fueled fears that improvements in AI may not immediately translate into faster expansion.
AI is “a huge disruption…a disruptive force that will change the way software is consumed and how it is built,” Garman added.
SaaS and big players may have structural advantages, but Garman believes they “have to innovate, just like the rest of the world. They can’t stand still. If they stay still, they’re absolutely going to be disrupted.”
Markets often react abruptly to technological changes, but the gap between expectations and measurable impact remains uncertain at this stage.
Follow TechRadar on Google News And add us as your favorite source to get our news, reviews and expert opinions in your feeds. Make sure to click the Follow button!
And of course you can too follow TechRadar on TikTok for news, reviews, unboxings in video form and receive regular updates from us on WhatsApp Also.
