KUALA LUMPUR, Feb 4 (Bernama) -- Bursa Malaysia erased early gains to end lower today as profit-taking emerged following recent gains. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) eased 5.44 points, or 0.31 per cent, to 1,742.82 from yesterday’s close of 1,748.26. The market bellwether opened 1.84 points lower at 1,746.42, and subsequently hit an intraday high of 1,751.22 in early trade before slipping to its day’s low of 1,740.49 during the mid-afternoon session. In the broader market, losers outpaced gainers 602 to 462, with 558 counters unchanged, 1,013 counters untraded and six suspended. Turnover declined to 2.59 billion shares valued at RM2.86 billion from yesterday's 3.25 billion shares valued at RM3.34 billion.
Summary
Software stocks are facing panic-level selling as investors fear AI will erode pricing power, margins and competitive moats. Even industry giants like Microsoft are not spared, pushing the sector into its worst selloff since the 2008 crisis. While valuations now look cheap and technicals signal oversold conditions, investors remain unsure where the bottom is.
What’s Driving the Selloff
AI disruption fears are accelerating, with new tools from Anthropic and Alphabet raising concerns that software products can be replicated or replaced
Traders describe the market as “get me out” selling, with little regard for valuation
The S&P North American Software Index fell 15% in January, its worst monthly drop since October 2008
Microsoft’s 10% plunge last week showed that even the strongest platforms are vulnerable
Earnings Are No Longer Enough
Only 71% of software firms beat revenue estimates, compared with 85% across tech
All software firms beat earnings, but stocks still fell
Investors are focusing on:
Slowing cloud growth
Rising AI spending
Uncertain long-term returns
AI = Wider Outcomes, Lower Confidence
According to analysts:
AI brings more competition and pricing pressure
Software moats are shrinking
Growth outcomes are harder to forecast, making valuations unstable
“The range of outcomes has widened — it’s harder to see what’s cheap.”
Downgrades & Capitulation
Adobe, Freshworks, and Vertex were downgraded on concerns over:
Seat compression
‘Vibe coding’
Multiple ceilings
Traders say no one knows the ‘hold-your-nose’ level yet
Is This a Buying Opportunity?
Some investors think so:
Microsoft now trades below 24x earnings, the cheapest in ~3 years
Sector-wide RSI signals oversold, the most since 2018
Select funds are buying on weakness, betting on long-term AI winners
But most agree:
A bounce may happen
A full recovery will take time
The key challenge is separating AI winners from losers
Big Picture Takeaway
The software sector is undergoing a violent reset, driven by fears that AI could commoditise large parts of SaaS. While valuations and technicals suggest oversold conditions, conviction is still missing. For now, fear dominates — but history suggests capitulation often precedes opportunity.
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