Wall Street strategists are urging caution as software stocks face a sharp sell-off driven by AI disruption fears. The tech-heavy Nasdaq fell over 2% last week, with Salesforce and ServiceNow shares plunging more than 9% amid concerns about AI agents like Anthropic’s Claude Code reshaping the industry. Analysts note the selling may be overdone, citing larger firms’ ability to adapt, but warn of new risks as AI adoption accelerates.

Tech capital expenditures, including Microsoft and Alphabet, are projected to exceed $650 billion this year, reflecting intensified investment in AI infrastructure. Meanwhile, investors are shifting toward defensive sectors like consumer staples and energy, which have outperformed tech year-to-date. Strategists emphasize diversification, advising against overexposure to AI-driven volatility.