Options traders are piling into bearish positions against the Invesco Dynamic Software ETF, betting that software companies face mounting pressure after a Citrini Research report highlighted artificial intelligence risks to the sector. The ETF, which tracks software-exposed firms, has seen its shares slump as investors react to concerns about AI's potential to disrupt traditional software business models. Trading volume in put options has surged, indicating heightened pessimism about near-term performance.

Citrini Research's analysis has triggered renewed selling in software stocks, with investors particularly worried about how AI could erode pricing power and margins for established software providers. The report's findings come as the broader technology sector faces multiple headwinds, including rising interest rates and valuation concerns. Software companies, which have been among the market's biggest winners in recent years, now appear vulnerable to a potential rotation away from high-multiple growth stocks.

The increased options activity suggests traders expect further weakness in software-exposed assets, with put buying concentrated in near-term expirations. This bearish positioning reflects growing skepticism about the sector's ability to maintain its recent outperformance amid AI-driven disruption and broader market uncertainty. The ETF's decline underscores how quickly sentiment can shift when fundamental concerns emerge about an industry's long-term growth prospects.