US software stocks to keep rebounding, says Goldman Sachs prime brokerage note

• Software and IT services were the most heavily shorted U.S. industries on Goldman's prime brokerage desk as of February 24, with short positions at the highest level since tracking began in 2016
• Long positions on these stocks stand at a record low, indicating minimal bullish sentiment among hedge funds despite Goldman's optimistic outlook
• The S&P 500 software and services index has shed over $1.2 trillion in market value with an 18% decline year-to-date before this week's 4% recovery

Summary: Goldman Sachs Sees Continued Rebound in US Software Stocks Despite Record Short Positions

Key Findings:

Goldman Sachs prime brokerage predicts the recent recovery in software and IT services stocks will continue, despite hedge funds holding record-high short positions against the sector. According to a client note dated February 26, 2026, software and IT services were the most heavily shorted U.S. industries on Goldman's trading desk as of February 24.

Market Performance:

The S&P 500 software and services index has declined over 18% year-to-date, erasing more than $1.2 trillion in market value. However, the sector showed signs of recovery this week, with the index rising over 4%.

Positioning Data:

• Short positions on software stocks reached their highest level since Goldman began tracking in 2016
• Long positions (bets on price increases) stand at record lows
• This extreme positioning comes as hedge funds maintain maximum bearish exposure to the sector

Market Implications:

The contrarian signal from Goldman suggests potential for a short squeeze or continued rally, as heavily shorted positions may be forced to cover if the recovery momentum continues. The disconnect between record bearish positioning and Goldman's bullish outlook indicates possible opportunities for investors willing to bet against the consensus hedge fund view.

The analysis highlights significant divergence between institutional sentiment and Goldman's proprietary desk outlook on the technology services sector.