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Today's Exclusive Story
3 ETFs to Play the Enterprise Software SlumpAuthored by Nathan Reiff. Originally Published: 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 under pressure as providers and customers navigate a shifting AI landscape, the inertia of legacy systems, and uncertainty about the long-term outlook for software-as-a-service (SaaS) companies. That stress is visible in the share-price drops for major providers such as ServiceNow (NYSE: NOW) and IBM Corp. (NYSE: IBM), which have slid roughly 40% and 20% year-to-date (YTD), respectively. One way for investors to play this trend is to buy exposure while prices are relatively low. If enterprise software companies can successfully adapt—either by integrating AI into existing offerings or by pivoting to models that sidestep AI disruption—they could stage a comeback. The exchange-traded funds (ETFs) below offer straightforward ways for investors who are optimistic about the sector to gain diversified exposure. IGV's Approach Combines Legacy Software Leaders With Smaller Growth Plays
The iShares Expanded Tech-Software Sector ETF (BATS: IGV) tracks a benchmark of U.S. software companies across market capitalizations. With more than 110 holdings, IGV gives investors access to large, well-known names such as Oracle Corp. (NYSE: ORCL)—which carry relatively high weights—as well as many smaller firms. Those smaller names may be especially attractive when the largest players are facing steep headwinds. A bet on a fund like IGV assumes the market will ultimately reward the software companies that best navigate the transition to AI. By blending established industry leaders with up-and-coming firms, IGV provides exposure to multiple potential winners. That said, IGV's valuation is not cheap. Its trailing price-to-earnings (P/E) ratio of 36.4 suggests it isn't a deep bargain despite an 18% YTD decline and a 0.39% expense ratio. Some investors may prefer to wait for further price weakness before committing capital. WCLD's Cloud Software Strategy Avoids Overweighting the Biggest NamesThe WisdomTree Cloud Computing Fund (NASDAQ: WCLD) follows an index of U.S.-listed firms that provide cloud-based software and services. With about 65 holdings, WCLD is more evenly weighted than IGV—one of its larger positions, DigitalOcean Holdings Inc. (NYSE: DOCN), represents roughly 2.1% of the portfolio, for example. That more balanced weighting reduces the risk that a few large names will dominate performance—helpful if the sector's biggest players experience outsized declines. Conversely, it could limit upside if only a handful of firms lead a market rebound. WCLD carries a slightly higher expense ratio than IGV (0.45%) and has a smaller asset base and lower average trading volumes. Still, liquidity appears adequate for most investors: managed assets are around $224 million and the one-month average trading volume is about 1.1 million shares. ARKK Could Be a Bargain While Down Slightly Year-to-DateThe ARK Innovation ETF (BATS: ARKK) is the priciest fund on this list, with a 0.75% expense ratio, but it has also been the best performer of the three—down by less than 1% YTD. Actively managed by a team led by Cathie Wood, ARKK targets companies that could benefit from AI and other disruptive technologies. It does not focus exclusively on software; its portfolio is concentrated in innovative tech names across geographies, though it tilts toward North American firms. With fewer than 50 holdings, ARKK is the narrowest portfolio among these ETFs; its largest positions can approach 10% of assets. The fund has a history of strong long-term returns and a track record of outperforming broader thematic ETFs at times. While it's down so far in 2026, investors who believe in its active, AI-focused strategy may see a buying opportunity. |
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