Software Bear Market: 2 Stocks Down 74% and 40% To Buy Now
The Motley Fool
by newsfeedback@fool.com (Jeremy Bowman)February 26, 2026
AI-Generated Deep Dive Summary
The software sector has experienced a significant downturn in 2026, driven by fears of AI disruption and high valuations. The iShares Expanded Tech-Software Sector ETF (IGV) has dropped 24% year-to-date through February 25, with major holdings like Microsoft, Palantir, and Salesforce among the hardest-hit. While concerns about AI tools like Claude Cowork have fueled selling in high-priced Software-as-a-Service (SaaS) stocks, some experts suggest that this decline may present buying opportunities for investors. Specifically, Figma (FIG) and Axon Enterprise (AXON) are highlighted as undervalued stocks to consider after their recent earnings reports.
The sell-off in software stocks has been partly justified by lofty valuations and the rapid advancement of AI technologies, which have raised questions about the long-term viability of certain SaaS business models. However, not all software companies are equally affected by these trends. Figma, a design collaboration platform acquired by Adobe, has seen its shares drop 74% year-to-date. Despite this sharp decline, analysts argue that Figma’s strong earnings and growing user base indicate resilience in the face of broader market headwinds. Similarly, Axon Enterprise, a leader in public safety software solutions, has fallen 40% so far this year but continues to demonstrate solid fundamentals.
These downturns present an interesting opportunity for investors, as oversold conditions often create entry points for undervalued stocks. Both Figma and Axon Enterprise have shown the ability to adapt to market challenges while maintaining strong financial performance. For those looking to capitalize on the software sector’s current困境, these companies may offer attractive long-term potential despite short-term volatility. As the AI-driven transformation of industries continues, identifying such resilient players could be key to building a robust investment portfolio in this evolving landscape.
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Originally published on The Motley Fool on 2/26/2026