Fears that AI could do more economic harm than originally anticipated were a negative influence on markets in the first quarter, especially for select sectors such as software. Indeed, we have not seen any significant rebound in the key fund for the tech sector right now, the iShares Expanded Tech-Software Sector ETF (IGV), observes Tom Essaye, president of the Sevens Report.
AI anxiety has been pushed to the back burner given the Iran war. The conflict actually spurred some money to flow towards Mag-7 names in a defensive rotation over the past two weeks. That isn’t surprising as they do have some defensive properties. But IGV has not participated.
iShares Expanded Tech-Software Sector ETF (IGV)
Source: TradingView
While it has not violated the 2026 low of $76.26 hit on Feb. 24, it’s not trading substantially above it (IGV closed just above $80 recently). Additionally, it has pulled back from the $88 high hit since early March, including a solid drop on Tuesday.
Nothing incrementally “bad” has happened. There have been no new Claude Cowork agents or AI developments that imply SaaS-pocalypse fears are getting worse. Recent software company earnings were generally “fine,” too.
But the fact IGV can’t get up off its back is concerning. If it breaks the 2026 low, that will be a negative signal for tech and the broader market.
Bottom line: It is not getting materially worse, but it hasn’t improved, either. Even if a lasting Middle East ceasefire is achieved, this market will still face dual headwinds from private credit worries and AI anxiety, as neither have substantially improved.
