Tech stocks are stumbling through 2026 as investors scramble to figure out who wins and who loses in the age of artificial intelligence. The selling has hit software-as-a-service (SaaS) companies the hardest, leading some analysts to label the downturn a “SaaS apocalypse.”
The numbers paint a bleak picture for shareholders. The iShares Expanded Tech-Software Sector ETF has tumbled roughly 24% this year, marking one of the sector’s worst stretches since 2022. This panic followed a wave of powerful updates from model developers like OpenAI and Anthropic. Investors worry these new tools will eat into profit margins, kill demand for standard subscriptions, or shift corporate budgets entirely toward infrastructure hardware rather than applications.
Matt Garman, the CEO of Amazon Web Services (AWS), thinks the market is getting it wrong. Speaking to CNBC, Garman argued that the sell-off is disproportionate to the actual risk. “Look, my own opinion is that much of the fear is overblown,” Garman said.
customers need computing power no matter what. Whether a company buys software from a vendor or builds its own AI tools in-house, the underlying need for cloud infrastructure keeps growing. Amazon’s recent earnings support this view. AWS revenue jumped 24% to $35.6 billion in the fourth quarter, beating analyst expectations. Operating margins also ticked up to 35%, proving that spending hasn’t stopped—it just looks different.
While infrastructure booms, application software is cooling off slightly, adding to the jitters. ServiceNow reported 20.7% revenue growth in the fourth quarter. While healthy, it is slower than the nearly 26% growth the company saw two years ago. Investors hoped AI features would trigger an immediate revenue spike, and they are punishing stocks where that hasn’t happened yet.
Garman acknowledges that AI is a disruptive force that changes how software is made and sold. He believes large SaaS players have a structural head start, but he offered a clear warning: size doesn’t guarantee safety. “They can’t stand still,” Garman noted. “If they stand still, they’re absolutely going to be disrupted.” For now, the gap between the market’s doom-and-gloom pricing and the stable financial results of these companies remains wide.
