Name: Here's how to navigate the pullback in software stocks
Uploaded: 2026-02-04T18:50:29+00:00
Duration: 565 s

Speakers

Joe Terranova — Senior Managing Director, Virtus Investment Partners

Liz Young Thomas — Head of Investment Strategy, SoFi

Jenny Harrington — CEO, Gilman Hill Asset Management

Jason Snipe — Founder, Odyssey Capital Advisors

Frank Holland — Reporter, CNBC

Summary

CNBC's Investment Committee debated the sharp pullback in software stocks and whether AI disruption fears are creating an overdone selloff. Liz Thomas favored using the weakness to buy a broad software ETF and leaned into cash-rich companies, while Jenny Harrington warned software is still expensive and prefers individual stock selection. Joe Terranova framed the market as an internal rotation from momentum to quality, and Jason Snipe watched for a productive coexistence between SaaS and AI agents.

Software stocks and the IGV ETF sold off on AI disruption fears and sentiment-driven indiscriminate selling.
Liz Thomas argued software earnings revisions and multiple compression make the selloff overdone and favors a broad ETF entry.
Liz Thomas also favors cash-rich quality companies, highlighting COWZ.
Joe Terranova sees market rotation from momentum to quality, with quality as a shock absorber.
Jenny Harrington says software still lacks margin of safety and prefers individual names over an ETF, citing DDOG and PLTR valuations.
Jason Snipe says software is expensive but sees potential harmony between traditional SaaS and AI agents.
The committee discussed earnings volatility, a new Fed chair, and elevated churn in tech.

Ideas

Joe Terranova Senior Managing Director, Virtus Investment Partners 1:02

S&P stuck, internal rotation continues.

Joe argues the S&P 500 has gone nowhere since October 29 and the market is not in a significant broad decline; instead, it is experiencing elevated internal rotation from software to semis, large caps to small caps, and tech into industrials, energy, and materials, so the index should be watched as a rotation regime rather than a broad selloff.

Joe Terranova Senior Managing Director, Virtus Investment Partners 1:44

Momentum is rotating into quality.

Joe sees today's key rotation as momentum factor into quality factor. Momentum ETFs are falling sharply and a single momentum strategy is not working; he argues investors need a quality overlay as a shock absorber because the momentum leaders from 2025 are being sold.

Joe Terranova Senior Managing Director, Virtus Investment Partners 1:44

Momentum is rotating into quality.

Liz Young Thomas Head of Investment Strategy, SoFi 2:55

Software selling is overdone; buy IGV.

Liz says software is a sentiment-driven, indiscriminate selloff; the AI disruption fears will not hit everything in IGV, including cybersecurity and other unrelated names. With earnings revisions up 10% since September, the group in a 30% drawdown, and about 32% multiple compression, she thinks selling is ahead of itself and a broad software ETF is a decent entry point once bottoming progresses, so investors can start toeing in.

Liz Young Thomas Head of Investment Strategy, SoFi 3:35

Buy cash-rich companies via COWZ.

Liz says this is why she made a call for cash-rich companies this year: investors are rotating toward quality and fundamentals. She points to the Cash Cows ETF, COWZ, as the way to play that appetite and says they are buying certain stocks in that vein.

Jenny Harrington CEO, Gilman Hill Asset Management 6:10

Avoid software ETF; pick individual names.

Jenny says investors should not buy software right now. She does not think the way to play the selloff is through an ETF because some software companies will go to zero while others are 50% off, so broad software exposure lacks the margin of safety and requires individual-stock discrimination.

Jenny Harrington CEO, Gilman Hill Asset Management 7:40

DDOG and PLTR still too expensive.

Jenny says even after multiple compression, DataDog still trades around 300 times earnings despite looking like an AI beneficiary, and Palantir is still around 100 times earnings. She says there is not enough margin of safety broadly in these software names, so she avoids them.

Jason Snipe Founder, Odyssey Capital Advisors 8:32

Watch SaaS for AI-agent harmony.

Jason says software still looks expensive at about eight times sales and investors must be discriminating, but he sees the selloff as a potentially protracted DeepSeek-like moment. He thinks traditional SaaS and AI agents may ultimately work together productively, so he is inching into the story rather than writing off the sector.

Here's how to navigate the pullback in software stocks

Summary

Ideas

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