Market Decline Presents New Opportunities, On 23 February 2026, equity markets dropped, and the S&P 500 dropped by over 1%, as most of the action heading into the bear market was fueled by technology stocks. However, there is one probability beneath this pressure of falling, which is that the basic measures of the main technology players are healthy despite the short-term headwinds.
Software Stocks Face Selling Pressure
The S&P North American Technology Software Index has fallen about 32% off its all-time high and, in the process, pulled along the leading software companies. It has made investors worried that artificial intelligence (AI) should not only maintain demand, but it may even replace the traditional sources of software revenue through automation. This concern has also led to the recent general selloff despite the fact that most of the companies are actively incorporating AI capabilities into their offerings.
Strong Fundamentals in Key Tech Leaders
This dichotomy is seen in Microsoft (NASDAQ: MSFT). Shares changed around $384 on 23, with a significant drop in the past compared with past values, thus increasing the general loss in the technology sector. However, the company has also shown good results in its last fiscal quarter: the revenue is up by 17% to $81 billion, and the non-GAAP net income is up by 24%. In December, Microsoft 365 Copilot subscriptions grew 160%, as the company saw strong enterprise demand in its AI-based solutions.
The public cloud services are further propelling the growth of Microsoft as Azure continues to acquire more market share. According to the stock, analysts at Wall Street pegged the stock at a median of $600, which implies a 50% increase, even more compared to the current position. Cloudflare (NYSE: NET) is not an exception. The web infrastructure and security expert saw a 39% rise in the number of customers paying, and also a 34% rise in revenues to $614 million dollars. It has a net revenue retention rate of 120%, which means that it has experienced a significant growth in the number of customers.
Expert Insight
A senior strategist at JPMorgan Chase notes that misunderstandings about how AI disruption will affect the industry have created an exceptional entry point into quality software stocks. Despite uncertainty, the fundamental factors driving long-term growth remain.
Looking Ahead
Market volatility can be here to stay, but a group of software stocks that have attained a high level of AI adoption and have a well-established financial position would fare better as the market stabilizes. The prepared patient investors who are willing to sail through the turbulence in the short term can thus gain the attractive value of the high-quality technology names.