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This Week's Exclusive Article
3 ETFs to Play the Enterprise Software SlumpSubmitted by Nathan Reiff. Date Posted: 5/4/2026. 
Key Points
- Major players in the enterprise software space like IBM and ServiceNow have experienced stock price declines this year amid concerns about AI and other issues.
- ETFs focused on the space, including IGV, WCLD, and, more broadly, ARKK, could be found at a relative discount while these companies are struggling.
- Still, software firms will need to adapt in order to reverse these trends, and the threat of AI looms large.
- Special Report: Elon Musk: This Could Turn $100 into $100,000
Enterprise software—large-scale tools designed for organizations and business clients—is in a slump as providers and customers alike navigate a shifting AI landscape, the inertia built into existing systems and uncertainty about the future of software-as-a-service (SaaS) companies. That pressure is reflected in the share-price declines of major providers like ServiceNow (NYSE: NOW) and IBM Corp. (NYSE: IBM) this year. Those stocks have fallen by about 40% and 20% year-to-date (YTD), respectively. One way for investors to play this trend is to buy while prices are relatively low. If the enterprise software industry can successfully adapt to the changing landscape—either by integrating AI into existing products or by shifting its focus to sidestep the threat of AI entirely—it may be poised for a rebound. The exchange-traded funds (ETFs) below may help investors who are optimistic about the space gain easy exposure. IGV's Approach Combines Legacy Software Leaders With Smaller Growth Plays
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The iShares Expanded Tech-Software Sector ETF (BATS: IGV) targets a benchmark index of U.S. software companies across market capitalizations. With more than 110 holdings, IGV offers exposure to major software names like Oracle Corp. (NYSE: ORCL), which typically carry heavier weights, as well as much smaller firms. It is the smaller names on the list that may appeal when some of the biggest players are seeing sharp share-price declines. A bet on a fund like IGV assumes the ETF will eventually favor the software firms best positioned to navigate the shift toward AI. By balancing major industry names with up-and-coming players, the fund may provide broad exposure to multiple approaches to that challenge. At the same time, investors will want to keep an eye on IGV's valuation. With a price-to-earnings (P/E) ratio of 36.4, the fund is not exactly a bargain, despite falling 18% year-to-date (YTD) and carrying an expense ratio of 0.39%. Some investors may prefer to wait a bit longer to see whether it drifts closer to a bottom before buying in. WCLD's Cloud Software Strategy Avoids Overweighting the Biggest NamesFor a different take on the software industry, the WisdomTree Cloud Computing Fund (NASDAQ: WCLD) follows an index of U.S.-listed firms providing cloud-based software and services. The ETF's 65 holdings are weighted more evenly than those of IGV—one of the largest holdings, DigitalOcean Holdings Inc. (NYSE: DOCN), makes up only about 2.1% of the portfolio, for instance. This means that even the more prominent names in WCLD's basket do not account for a disproportionate share of the portfolio. That can help mitigate damage if larger players see steep price declines. On the other hand, it may also limit upside if only a handful of software companies rally. WCLD has a somewhat higher expense ratio than IGV at 0.45% in annual fees, along with a smaller asset base and lower average trading volume. Even so, liquidity should not be a major concern for investors, as those levels remain fairly robust, with managed assets of about $224 million and a one-month average trading volume of 1.1 million. ARKK Could Be a Bargain While Down Slightly Year-to-DateThe ARK Innovation ETF (BATS: ARKK) is the most expensive fund on this list, with a 0.75% expense ratio that may deter some investors. However, it also has the best performance of the three—although it is still negative YTD, it has declined by less than 1% over that period. This fund is actively managed by a team led by well-known tech investor Cathie Wood. More specifically, it targets companies that could benefit from the AI revolution. It is not exclusively focused on software companies, but instead has a broader technology mandate that includes primarily North American companies without being limited by geography. With the narrowest portfolio of the three funds on this list, ARKK has fewer than 50 positions, and its largest holdings may account for close to 10% of the portfolio. The fund's long-term performance history is fairly strong, and it has a reputation for beating the market and more broadly structured thematic ETFs in many cases. While it's down so far in 2026, it may present investors with a buying opportunity. |
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