"Software has undergone the largest non-recessionary 12-month drawdown in over 30 years (-34%), wiping out ~$2T of market-cap from the peak and reducing its weight in the S&P 500 from 12.0% to 8.4%, according to Dubravko Lakos-Bujas and his colleagues at JPMorgan. This was largely driven by mounting concerns over the disruptive impact of new LLM [large language model] capabilities and further exacerbated by aggressive de-risking and extreme technical positioning that has pushed sentiment to deeply pessimistic levels."
"The market is pricing in worst-case AI disruption scenarios that are unlikely to materialize over the next three to six months. Enterprise software remains deeply embedded across the corporate landscape, underpinned by multi-year contracts and high switching costs that provide a significant buffer against near-term displacement. Importantly, emerging evidence suggests that AI is more likely to be additive to software workflows in the near term rather than a substitute, he told clients in a recent note."
S&P 500 futures rose 0.18% before the New York open after the index gained 0.47% the prior session, leaving it just below its all-time high. Traders bought stocks after most S&P companies reported earnings that beat consensus estimates. Last week saw a dramatic AI-driven sell-off in software, with some accounts noting trillions wiped from software market caps and JPMorgan reporting a roughly 34% non-recessionary drawdown that erased about $2 trillion and cut software’s S&P weight. JPMorgan warns markets are pricing worst-case AI disruption, while noting enterprise software’s multi-year contracts and high switching costs limit near-term displacement. Major tech firms disclosed steep increases in AI-related capital expenditures, with hyperscalers raising 2026 capex guidance by about 24%.
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