As the software selloff enters its eighth consecutive day, industry experts are warning of a potential “unresolvable existential threat.” According to Aaron Nordvik, the sector is facing a significant challenge that could have far-reaching consequences. Despite strong EPS revisions, valuations are collapsing, with the Software ETF (IGV) not being this oversold since 2006.

The selloff in software stocks has been driven by a combination of factors, including cyclical weakness and tech pressure. In particular, the recent string of weaker Challenger and JOLTS data has contributed to the lag in cyclicals, while pressure on tech stocks continues to impact the sector.

Despite the challenges facing the industry, some analysts are taking a more optimistic view. Karl Keirstead and his team at UBS have conducted a deep dive on AI-risk and have found that exposure to cyber or data infrastructure can provide a measure of protection against the selloff.

The sector is facing an “unresolvable existential threat,” according to Nordvik, as valuations collapse and EPS revisions slow. The selloff in software stocks has been broad-based, with all sub-sectors experiencing significant declines. However, some analysts believe that the sector may be due for a reprieve, particularly if earnings season can provide some positive surprises.