Hedge funds made $24B shorting software stocks in 2026 and they are doubling down
Hedge funds have already made about $24B betting against software stocks this year and are increasing their short positions. The trade reflects concerns over stretched valuations, slower enterprise spending, and uncertainty around AI monetization timelines. The sector was a crowded long for years, which is now amplifying downside as money rotates elsewhere.
Hedge funds have made $24 billion from shorting software stocks this year, contributing to a brutal sell-off in the sector, according to sources at two major Wall Street funds. The overall market value in the industry has decreased by $1 trillion, with the iShares Expanded Tech-Software ETF down 30% from its all-time high. Short sellers are focusing on companies that provide basic automation services, which can be easily replicated by new AI tools. Some of the worst performers include Intuit and DocuSign, both down more than 30%, while Microsoft and Oracle are down 15% and 21%, respectively.
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