The soft apocalypse is 99% complete - an assessment from one of Wall Street's most accurate strategists

"Soft apocalypse", which deprived software developers in early February of almost $1 trillion in market capitalization and fueled by a viral report by Citrini Research on the threat of AI, is almost complete, according to Tom Lee, head of research company Fundstrat, writes MarketWatch. The portal calls Lee one of the most accurate forecasters on Wall Street: among other things, he advised buying stocks on the downturn during the pandemic and accurately predicted the 2023 bull market.

"The software market has 99% completed the sell-off and is now in the final weeks of correction," Morningstar quoted Tom Lee as saying. According to the forecaster, the sell-off in the technology sector as well as the cryptocurrency market is also nearing an end. "We are seeing signs that [these sell-offs] may have already moved significantly toward the bottom," Lee noted.

Markets usually bottom on the back of the most negative events, explains the head of Fundstrat. For the technology sector, he believes, such a moment could be the sell-off caused by Citrini Research's forecast about the possible negative impact of AI on the global market.

Now, the strategist believes, there are signs that the market is already approaching a turning point: the low in shares of software companies could have been recorded on February 23. In addition, investors are already 95% "involved" in the fall of shares of the "Magnificent Seven", says Lee, and outflows of funds have approached extreme levels - historically, such values often coincided with the formation of the bottom. The correction in the cryptocurrency market is also approaching its finale, according to Lee.

A tipping point is coming for software developers: they will have to shift from a service-based model to a results-oriented model as AI agents are deployed, Counterpoint Research co-founder Neil Shah told CNBC.

Siddy Jobe, chief portfolio manager at Econopolis Wealth Management, agrees that AI will not replace companies' businesses, but will build into them. "These tools already exist and their capabilities will be enhanced by AI," he told CNBC. - This will become visible for companies like Salesforce and ServiceNow: customers will be willing to pay once efficiency increases." At the same time, Jobe doesn't think all companies are the same and recommends buying "AI infrastructure software" papers, meaning those software vendors that help improve AI tools. He cited US companies Snowflake and Datadog as examples.

Securities of technological companies, including software developers, showed positive dynamics for two days in a row: February 24 and 25. At the same time, the information technology industry index S&P 500 was also growing. Technology stocks were supported, among other things, by the forthcoming publication of the report of the most expensive company in the world - Nvidia, Bloomberg noted. However, the day after the release of the report, February 26, the S&P 500 Information Technology fell more than 2%.

Nevertheless, BNP Paribas head of strategy Greg Bautle noted before the U.S. markets began trading on Feb. 26, "The next couple of weeks [in the U.S. market] could see a mega rally led by technology companies." The fact is, Bloomberg explains, that the BNP Paribas leverage indicator tracking ETF flows and hedge fund futures strategies has fallen to its lowest level since November 2025. Ironically, this could serve as a buy signal, Bloomberg writes. The rally in question has the potential to push the S&P 500 to the psychological 7,000-point mark, Bautl says. Investors' cautious attitude toward the market could be the basis for a sharp rebound, Bloomberg notes.

"We've seen a huge flow of capital into very short-term tactical hedges," said Citigroup head of strategy Stuart Kaiser, "Equity markets have not reacted significantly to most geopolitical events over the past six to twelve months. If the Iran-related risk settles down, much of the risk premium will be squeezed out of the market and investors who have stayed on the sidelines will start to return to buying."

In trading on February 26, the S&P 500 fell 0.6%, while the Nasdaq Composite lost 1.3%.

This article was AI-translated and verified by a human editor