Software Sector Selloff Weakens Dip-Buying: Tech-Software ETFs Down, ARKK Falls 7%

February 04, 2026 — The software sector continued its sixth-straight decline, down 1% on Wednesday as broader selloffs erased a 3.9% drop on Tuesday. Dip-buying activity was conspicuously absent, with options flow heavy on defensive positioning and traders favoring downside exposure over buying opportunities. Options traders highlighted weakness in the iShares Expanded Tech-Software Sector ETF (-3%) and ARKK Innovation ETF (-6.9%). Microsoft, the lone bright spot, rose 1% amid a 15% decline since January 28, as short interest increased by about 20% over the past week, signaling growing bearish sentiment. The broader selloff reflected a shift from AI optimism to disruption fears, with software companies facing renewed pressure from rising interest rates and sector-specific volatility.