Once-Hot Enterprise Software Stocks Cool as Investors Get Picky

Enterprise software, long one of the hottest sectors of the tech industry on the public market, has suddenly turned cold.

Fears about rising interest rates and a slowdown from pandemic-driven growth surges have delivered a double whammy to enterprise software stocks in recent months. A group of 46 such firms are down 3% so far this year, compared to 2020 when they were up 97%. The Nasdaq as a whole is up 18% on the year.

The broader cooldown signals that investors are becoming more discriminating about software stocks, said Tyler Radke, a senior software equity research analyst at Citi. “Investors are getting a little bit picky in terms of who the real winners are,” Radke said.