Software sector stocks, including Pegasystems, Cadence Design Systems, and Varonis Systems, plummeted due to growing concerns about the impact of artificial intelligence on traditional SaaS providers. This led to a broader sell-off in the tech sector, with the Nasdaq Composite index declining 0.8% and the S&P 500 slipping. Institutional investors are repositioning their portfolios in favor of companies with AI-integrated moats.