The software selloff is giving investors an opportunity they haven't had in a year: tech stocks on sale.

Why it matters: Investors just have to delineate between the stocks that can survive and the ones that will become the BlackBerrys of AI disruption.

What they're saying: "Good companies are getting disregarded," Marta Norton, chief investment strategist at Empower Investments, tells Axios.

• Yes, there's a risk of "catching falling knives, but there's also great opportunity," she adds.

Zoom in: How do you choose?

• Software companies that offer one form of application may be at risk, while those offering full workflows powered by their infrastructure could be buying opportunities.
• Under that thesis, a company like Microsoft would be a buy at current price levels, while Docusign, known for offering one primary solution that could be replaced by AI, would not be.

Threat level: The risk is a fundamental re-rating of valuations for software.

• Norton points to the example of BlackBerry. Yes, it survived, but its stock is down about 98% since its peak.

Between the lines: This points to the importance of stock picking, which had fallen off amid an AI-driven bull market post-2022.

• Investors were able to own the entire tech sector and earn great returns, especially given the rise of the so-called Magnificent 7.
• Now, even the Mag 7 is bifurcating, and returns of the tech sector are divided as well: 50% of tech stocks have delivered the worst returns of the S&P 500 year-to-date, while 20% have delivered the best.

The bottom line: Market drops like the software selloff allow investors to find a sale they like and, therefore, an edge.

• If they pick the right stocks, at least.

Alphabet is going to spend more money on AI this year, and so are all the other hyperscalers that have reported earnings so far.

Why it matters: The shares of Alphabet bounced around in trading after hours as Wall Street digested a world where the ceiling on spending never comes.

• But shares of companies that benefit from that spending rose.

Driving the news: Alphabet plans to spend $180 billion at the midpoint of its projections for the year.

• Analysts tracked by Bloomberg expected Alphabet, Google's parent company, to spend just under $120 billion.
• This comes after Alphabet spent over $90 billion in 2025.

Zoom out: More spending presents a challenge for investors who have bid up Alphabet as their AI darling, given its penchant for responsible spending.

• Capex as a proportion of cash flow is the lowest for Alphabet among the hyperscalers.
• But 2026 investors want a story on how this spend is benefiting profits.
• That's why Meta soared after its earnings report: Yes, the company increased spending, but it told a story about how that spending is fueling great ad revenue.

Follow the money: Of course, there are beneficiaries of Alphabet opening its pocketbook.

• Chipmakers Nvidia, Broadcom and AMD popped up after the market close, even though all three were down during the trading day as investors rotated out of tech.

Between the lines: Even if the spending isn't viewed as justified longer term, it's going to lead to boosted earnings near term for the companies providing the chips to power the AI buildout.

The bottom line: Investors are more skeptical of the AI buildout.

• Unless you have a compelling story of return on your AI investment.

Tech stocks are underperforming the S&P 500 so far this year amid a broad rotation into value stocks, particularly consumer staples.

Why it matters: Wall Street isn't so impressed with AI's shine anymore. Investors want proof of returns, solid growth stories and, yes, fundamentals (imagine!).