Software Chart + Longshots Update
Software stocks plunged late last week on more AI Doom fears, this time from an announcement by Anthropic that its latest and greatest Mythos model was able to find significant vulnerabilities in many supposedly secure systems in mere minutes. By the end of the week, headlines hit that Treasury Secretary Bessent and Fed Chair Powell had summoned CEOs of the largest banks for a meeting on the topic.
In an effort to save the world from digital disaster, Anthropic announced that instead of releasing the Mythos model to the public, it reached out to a couple dozen of the world’s most important institutions so they could use the model to find vulnerabilities in their tech infrastructure.
From Tuesday’s close (the night the US/Iran ceasefire was announced) through Friday, the iShares Expanded Software ETF (IGV) fell another 8% and made fresh 52-week lows in the process.
This weekend, White House AI & Crypto Czar David Sacks made comments that “Anthropic has proven that it’s very good at two things. One is product releases, the second is scaring people. At the same time they roll out a new model, they also roll out some study showing the worst possible implication where the technology could lead.”
Sacks went on to post on X that “a growing number of people are wondering if Anthropic is the AI industry’s “boy who cried wolf.” If Mythos-related threats don’t materialize, the company will have a serious credibility problem.”
There was also more than pure altruism at play regarding Anthropic’s decision: the company is already severely constrained in compute capacity, and releasing a more resource-intensive model would have only made matters worse.
Whether or not the Anthropic pushback is the main reason, we’re seeing the software ETF (IGV) bounce back significantly to start the new trading week. IGV rose 5% on Monday.
As shown below, however, the bounce does nothing to break IGV out of its nasty downtrend. While it may be tempting to jump into the beaten-down software group, at this point, you’re still catching a falling knife.
For us to turn more positive, we’d want to first see the 50-DMA get retaken and then a series of higher lows and higher highs get established. For that to happen, IGV will have to move back above its highs from early March in the high $80s. Right now, IGV is still just below $80.
Looking at a longer-term five-year chart of IGV, we’ve seen massive volume in the last month or so, indicating significant distribution in the group underneath the surface.
