Here's how to navigate the pullback in software stocks

• Software stocks are experiencing a significant sell-off, with the iShares Expanded Tech-Soft ETF (IGV) down over 2% intraday and over 21% year-to-date.
• The market is undergoing an internal rotation from momentum-driven tech names into quality, industrials, energy, and materials.
• Valuations in many software companies, despite recent pullbacks, are still considered high (e.g., Datadog at 300x earnings, Palantir at 100x earnings).
• Analysts suggest starting research now to identify potential long-term winners, but caution against broad buying, preferring individual stock selection over ETFs due to the risk of some companies going to zero.

The discussion focuses on the recent sell-off in software stocks, driven by fears of AI disruption and a broader market rotation from momentum to quality. While some analysts see indiscriminate selling creating potential buying opportunities, others caution that valuations remain high and further downside or prolonged volatility is possible. Recommendations lean towards selective individual stock research rather than broad ETF plays, with a focus on quality and cash-rich companies.