Short interest in software stocks has reached its highest level since the global financial crisis, according to Deutsche Bank. Analyst Parag Thatte reported that median short interest across software companies has surged to over 5%, the highest in 17 years, placing it in the 93rd percentile over the past two decades.

Thatte noted that software shares have fallen 25% below their 200-day moving average, a decline worse than the 2022 tech unwind and the March 2020 pandemic selloff. The bank compared this to the 2014 energy sector collapse, where shares fell 25% and continued declining for 18 months as earnings deteriorated.

Deutsche Bank explained that past major selloffs were typically followed by earnings deterioration within one to two quarters. In 2022, software earnings growth fell to zero, while in previous downturns it turned outright negative. The bank warned that a further sustained decline would likely require evidence of weakening earnings, even though consensus forecasts for 2026 have been rising.