Want to buy a discount on software tech stocks like Palantir, Microsoft and Oracle? Consider this BlackRock ETF.

Last year, technology outperformed the other 10 stock market sectors and S&P 500offering a total return of 24.7%. Many of these gains were driven by semiconductor stocks such as Nvidia, Broadcom, Micron technology, Advanced microdevices, Lam Researchand Applied materials.

In fact, software stocks, which have been a driver of gains in the technology sector, are in a slump amid investor concerns that artificial intelligence (AI) will disrupt the industry, particularly the software-as-a-service (SaaS) model. Investors looking for an all-in-one way to buy the dip in software stocks may want to consider an exchange-traded fund (ETF).

Where to invest $1,000 right now? Our team of analysts just revealed what they think they are 10 best stocks to buy right now when you join Stock Advisor. View stocks »

Here’s why BlackRockhis iShares Expanded Tech Software Sector ETF (NYSEMKT: IGV) has been shot down, why is it distinctly different from a broader technology ETF such as iShares US Technology ETF (Nysemkt: iyw)and why investors specifically looking to buy the dip in software stocks might want to take a closer look at the fund.

The iShares US Technology ETF is heavily concentrated in megacap technology-focused companies — with a staggering 44.5% weighting in Nvidia, Appleand Microsoft. By comparison, the iShares Expanded Tech Software Sector ETF is smaller and provides greater exposure to software stocks that may have small weightings in a general tech ETF.

Data source: BlackRock.

Data source: BlackRock.

While the broader market continues to hit new all-time highs, there has been a noticeable slowdown in software stocks. The iShares Software ETF is down 12.9% over the past three months. And all of its top 10 holdings, including Palantir, lost value during that period, even as the S&P 500 gained 4.7%.

Microsoft has been under pressure, mainly because of its association with OpenAI, which is contested by the Alphabet twins. OpenAI’s large language models power Microsoft’s AI tools like Copilot. But Microsoft must eventually turn its big AI capital expenditures into earnings. Investors should get better visibility into OpenAI’s finances if it goes public in 2026.

Like Microsoft, Oracle is also closely associated with OpenAI as it accounts for most of the remaining performance obligations (backlog). Oracle’s cloud business, called Oracle Cloud Infrastructure, is growing at a breakneck pace and could overtake its legacy database software business as its main cash cow in the coming years. But for now, investors are worried about Oracle’s balance sheet, which is depleted by debt used to build AI data centers.

Palantir’s results, growth rate, and stock price are all up in 2025. Therefore, the recent pullback is likely more a result of valuation concerns — as Palantir has a price-to-sales ratio of 112 and a forward price-to-earnings (P/E) ratio of 169.

Investors care more about where a company is going than where it has been. Just a few years ago, enterprise software stocks like Salesforce and Adobe were red-hot, high-growth stocks trading at premium valuations. Fast forward to today, and Salesforce is trading at a P/E ratio of 19.3, while Adobe is at just 12.6, compared to 23.9 for the S&P 500. The discount may seem odd given that Salesforce and Adobe’s earnings are at all-time highs. But their low valuations suggest that investors expect earnings growth to slow dramatically or even turn negative in the coming years.

Salesforce and Adobe are down 29% and 30% respectively over the past year. But other enterprise software giants like ServiceNow, monday.comand Atlasian they fell even further — between 40% and 53%.

Cybersecurity stocks generally held up better amid broader software selling, but SentinelOne, Fortinetand Datadog have all lost value in the past year, OktaPalo Alto Networks and Zscaler have underperformed the S&P 500, and CrowdStrike stands out as an exception, outperforming the S&P 500 over the past year.

Wall Street despises uncertainty. And right now, the software industry is full of it. Enterprise software businesses with subscription models depend on an increasing number of subscribers (human users). But if AI tools allow a single user to handle the frontloading of multiple users, then an enterprise may not need so many subscriptions.

There is also concern that free or inexpensive AI tools, such as text-to-image and video generation, will replace some of the workflows that used to be done by, say, a graphic designer using the Adobe Creative Cloud suite.

On the cybersecurity front, AI is increasing the complexity of cyber attacks, which is pushing cybersecurity companies to improve their defenses through network security, firewalls, data encryption, etc. The challenge for cybersecurity companies is to adapt to more sophisticated threats while passing those costs on to customers.

There are plenty of ways to buy the dip in software stocks, whether it’s a former highflier like Palantir, software/cloud hybrids like Microsoft and Oracle, enterprise software companies, cybersecurity, etc. But when an entire industry is under pressure, one of the easiest options is to buy an ETF. This is a good way to bet on an industry-wide recovery even if leadership changes, rather than investing in a single stock and hoping it recovers.

While I think the software stock selloff is overblown, we could see a major reshuffle where former leaders shake out, some bounce back, and new companies emerge. Given the speed and scale of disruption, the iShares Expanded Tech Software Sector ETF looks to be one of the best ways to invest in software stocks in 2026 and beyond.

Before buying shares in the iShares Trust – iShares Expanded Tech-Software Sector ETF, consider the following:

The Motley Fool Stock Advisor the analyst team has just identified what they think they are 10 best stocks for investors to buy now… and iShares Trust – iShares Expanded Tech-Software Sector ETF was not one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you would have $461,527!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you would have $1,155,666!*

Now, it’s worth noting Stock advisor the total average yield is 950% — a market-crushing outperformance compared to 197% for the S&P 500. Don’t miss the latest top 10 list, available with Stock advisorand join an investor community created by individual investors for individual investors.

See the 10 stocks »

*The Equity Advisor returns as of January 29, 2026.

Daniel Foelber has positions in Adobe, Nvidia and Oracle and has the following options: long January 2028 $300 calls on Adobe and short March 2026 $240 calls on Oracle. The Motley Fool has positions in and recommends Adobe, Advanced Micro Devices, Alphabet, Apple, Applied Materials, Atlassian, CrowdStrike, Datadog, Fortinet, Intuit, Lam Research, Meta Platforms, Microsoft, Monday.com, Nvidia, Okta, Oracle, Palantir Technologies, Salesforce, SentinelOne, ServiceNow, and Z. The Motley Fool recommends BlackRock, Broadcom, Micron Technology, and Palo Alto Networks and recommends the following options: long $395 January 2026 calls on Microsoft $330 January 2028 on Adobe, $405 January 2026 short calls on Microsoft, and $340 January 2028 short calls on Adobe. The Motley Fool has a disclosure policy.

Want to buy a discount on software tech stocks like Palantir, Microsoft and Oracle? Consider this BlackRock ETF. was originally published by The Motley Fool