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This Month's Exclusive Article
3 ETFs to Play the Enterprise Software SlumpAuthored by Nathan Reiff. Article 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.
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Enterprise software—large-scale tools designed for organizations and business clients—is going through a slump as providers and customers alike navigate the shifting AI landscape, the inertia built into existing systems, and uncertainty about the future of software-as-a-service (SaaS) companies. This is reflected in the declines in the share prices of major providers like ServiceNow (NYSE: NOW) and IBM Corp. (NYSE: IBM) this year. These 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 shifting landscape—that is, if companies can either integrate AI into their existing products or shift their focus to bypass the threat of AI entirely—they may be able to recover. 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
The iShares Expanded Tech-Software Sector ETF (BATS: IGV) tracks a benchmark index of U.S. software companies across market capitalizations. Across more than 110 holdings, IGV offers exposure to major software names like Oracle Corp. (NYSE: ORCL), which tend to be fairly heavily weighted, as well as much smaller firms. It's the smaller names on the list that may appeal at a time when some of the biggest players are being hit with share price declines. A bet on a fund like IGV assumes that the ETF will eventually favor the software firms that best navigate the shift toward AI. By balancing major industry names with up-and-coming players, this ETF may provide easy access to multiple approaches to this 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 by 18% year-to-date (YTD) and carrying an expense ratio of 0.39%. Some investors might choose to wait a bit longer to see whether it continues to decline toward a bottom before buying in at a better value. 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), accounts for only about 2.1% of the portfolio, for instance. This means that even the more prominent names in WCLD's basket do not make up a disproportionate share of the portfolio. That can help mitigate damage if big players see steep price declines. On the other hand, it may limit upside if only a small number of software companies rally. WCLD has a somewhat higher expense ratio than IGV at 0.45% in annual fees, as well as a smaller asset base and lower average trading volume. However, liquidity should still not be a major concern for investors, as these 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 scare off 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% during that time. This fund is actively managed by a team led by the well-known tech investor Cathie Wood. Specifically, the fund targets companies that could benefit from the AI revolution. It is not uniquely focused on software companies, but rather has a broader tech mandate that includes primarily North American companies but is not limited by geography. With the narrowest portfolio of the three funds on this list, ARKK has fewer than 50 positions, and the largest of them may account for close to 10% of the invested asset base. This fund's long-term performance history is quite 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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