---
title: "AI panic is labeled as \"emotional killing,\" and the big short Bill Ackman boldly turns bullish! U.S. software stocks rebound violently"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/283270933.md"
description: "After a long period of stagnation, U.S. stocks in the cybersecurity and enterprise software sectors rebounded strongly last week, successfully recovering losses caused by the U.S.-Iran conflict. As pessimism surrounding AI diminishes, Wall Street is beginning to reassess the long-term impact of AI on the industry, leading to a gradually optimistic outlook among investors for the software sector. Despite still experiencing declines this year, the Global X Cybersecurity ETF and First Trust Nasdaq Cybersecurity ETF rose by 12% and 9% respectively last week. Analysts have raised their earnings and revenue expectations for the software sector, forecasting a profit growth rate of 16.5% by 2027"
datetime: "2026-04-20T00:38:06.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/283270933.md)
  - [en](https://longbridge.com/en/news/283270933.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/283270933.md)
---

# AI panic is labeled as "emotional killing," and the big short Bill Ackman boldly turns bullish! U.S. software stocks rebound violently

According to Zhitong Finance APP, after experiencing several months of continuous downturn and historic valuation compression in 2026, the U.S. stock market's cybersecurity and enterprise software sectors saw a strong rebound last week, successfully riding the wave of the broader market's recovery. The Dow Jones Industrial Average and the S&P 500 Index have regained all the losses incurred due to the U.S.-Iran conflict. As the extreme pessimism surrounding "AI disrupting everything" begins to fade, Wall Street is reassessing the long-term impact of artificial intelligence (AI) on the industry, with several well-known investors and analysts shifting their views on the software sector from pessimistic to optimistic.

## Emotional Kill and the Scissors Gap of Fundamentals

The previous continuous sell-off stemmed from deep concerns in the market about AI-native companies (such as Anthropic and OpenAI) disrupting traditional software business models. Investors worried that AI would permanently weaken enterprise software pricing power, revenue growth, and profit margins, thereby eroding the long-standing high valuation premiums in the industry. **However, this disruptive risk is more reflected in market sentiment rather than company financial data. Moreover, due to the previous sell-off, valuations have been significantly lowered, and some investors see an opportunity to re-enter.**

Data shows that the Global X Cybersecurity ETF (BUG.US) has recorded a decline of about 12% year-to-date, but last week it surged by 12% in a single week; the First Trust Nasdaq Cybersecurity ETF (CIBR.US) also recorded a weekly increase of 9%. This dramatic reversal highlights that the sector's previous struggles were not due to performance decline, but rather extreme emotional suppression.

![ca0f1ffd5135ea17606039f7f7316b2.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260420/1776641850730882.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

**The return of funds is driven not only by cheap valuations but also by marginal improvements in profit expectations. Industry research data shows that Wall Street analysts have quietly raised their expectations for the software sector, predicting that profit growth for software and service companies will reach 16.5% in 2027, an upward revision from the 15.7% forecast at the end of February, with revenue expectations showing a similar upward trajectory.**

Christian Magoon, CEO of Amplify ETFs, described this phenomenon as "the victim of AI-related news." He pointed out, "The main reason for the sharp decline in software stocks was that investors shifted their funds to AI infrastructure and semiconductor sectors. Cybersecurity stocks, despite continuous fundamental growth, failed to benefit from this."

This is particularly evident in the divergence between the valuations and performance of leading stocks. Data shows that after a nearly 20% decline in the stock price of tech giant Microsoft (MSFT.US) year-to-date, it surged by 13% last week. After Piper Sandler analyst Rob Owens reaffirmed an "overweight" rating on Palo Alto Networks (PANW.US), the stock jumped 7% in a single day, but its year-to-date decline remains close to 6%. Other similar companies, such as CrowdStrike (CRWD.US), also exhibited a similar deep V-shaped trend Magoon stated that artificial intelligence has indeed brought opportunities and uncertainties to the cybersecurity industry, increasing demand while also introducing new competition.

## Institutions and Investment Tycoons Shift Positions: The Logic of Inverse Capital Inflow from "Crowding Effect" to "Positive Feedback Loop"

Market sentiment indicators have also reversed. As sector valuations have declined, Wall Street's pessimistic narrative has begun to crumble. Jefferies technology analyst Brent Thill clearly stated that the worst period for the software sector may be over. "The notion that the software industry is dead and that Anthropic and OpenAI will kill the entire industry is exaggerated," Thill said.

More significantly, renowned investor and the prototype of "The Big Short," Michael Burry, has also changed his view following the recent sell-off. Burry pointed out in a post last Wednesday: "Due to the sharp decline in software stocks recently, and the positive feedback loop formed between the decline in software stocks and changes in the banking debt market, software stocks are still worth watching."

**Burry noted in his analysis that the sharp decline in stock prices is forming a "positive feedback loop" with changes in their debt market. The underlying logic of this professional term is that a sharp drop in stock prices can trigger convertible bond clauses or insufficient collateral for loans, leading to technical sell-offs by creditors, which in turn causes stock prices to fall further irrationally. Burry is particularly focused on the extreme bottom that will emerge once this forced deleveraging chain ends and the chips are cleared.**

**![aa298ef11f1b9e8e30f90f7dbe9264d.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260420/1776641975831540.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)**

Senior strategist Ed Yardeni also stated that U.S. tech stocks have returned to attractive levels for long-term investors after falling from last year's historical highs. Bill Baruch, head of asset management giant Blue Line Capital, emphasized that software stocks have been "wrongly punished," with targets like ServiceNow (NOW.US), Oracle (ORCL.US), and Microsoft being attractive, having deployed half of their cash reserves to increase positions in the software sector.

Additionally, Wall Street investment banks have expressed bullish views through research reports. Goldman Sachs strategist Peter Oppenheimer clearly pointed out that the pullback in the tech sector constitutes a "value opportunity," citing that the forward PEG ratio of global tech stocks has fallen below 1, and the rolling PEG metric is at its lowest since 2005. Analysts have continuously revised upward their earnings expectations for 2026 and 2027, and high net asset returns also support the current valuation levels.

Wells Fargo also believes that information technology stock valuations have reached attractive levels for investors. Wells Fargo Investment Research has upgraded the sector's rating from "neutral" to "positive," citing that the sector has underperformed the S&P 500 index and that the widespread application of artificial intelligence supports its robust growth prospects ![658ac948988158229d1b3df23a977fa.png](https://imageproxy.pbkrs.com/https://img.zhitongcaijing.com/image/20260420/1776642067600700.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg)

**Market analysis suggests that the significant valuation correction not only brings the price-to-sales ratios of some SaaS companies down to lows but may also prompt a resurgence of leveraged buyouts (LBO) in the private equity market. Additionally, to address the new types of cyber threats posed by AI, large technology companies are expected to increase their M&A activities in the security sector, which will directly benefit the bottom support for stock prices in this segment.**

In this regard, Magoon further added, “Once the stock prices in certain sub-sectors drop by more than 10%, contrarian investors begin to enter the market. In an AI-driven world, the threats faced by companies may actually stimulate an increase in M&A activities in the cybersecurity field, which poses potential support for stock prices.”

## Alert Not Removed: Long-term Layout Under the Midterm Election Curse

Despite a rapid short-term rebound, Wall Street remains cautious about blindly chasing highs. Thill admitted that investors are still inclined to “underweight” software stocks, while Magoon issued a more explicit macro warning.

**Magoon cited historical data indicating that 2026, as a midterm election year, is often accompanied by significant market declines and high volatility.** “If you think the current situation is bad, it might get worse,” Magoon warned.

However, Magoon also pointed out that for patient investors, these cyclical declines contain opportunities. **According to historical patterns, after the pullback triggered by midterm elections ends, the market often sees very strong returns over the following 12 months. For investors holding cash and waiting to enter, Magoon referenced Bank of America data to provide a historically statistical observation path: the best performers are often those contrarian targets that had the least buying in the early stages of the decline.** He mentioned that last year, institutional holdings in energy stocks were at multi-year lows, and the subsequent contrarian sentiment indicators validated their explosive potential. But applying this logic to the software sector requires extending the time dimension.

**Currently, although some analysts (like Thill) still advise investors to maintain an “underweight” position in severely impacted software stocks and look for marginal opportunities,** **Magoon suggests that for investors with a longer investment horizon who do not require short-term liquidity, closely monitoring quality sub-sectors and “holding on” during the current market downturn will be key to capturing future recovery dividends.**

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