February Market Recap
Markets faced renewed pressure in February, driven by concerns in the software sector, legal developments regarding tariffs, and rising geopolitical tensions.
Software stocks declined as investors grew more cautious about the subscription-based model. Rapid advances in AI raised concerns about margin compression and how quickly existing business models may need to adapt (more below).
The Supreme Court ruled that President Trump’s use of the IEEPA to impose tariffs was unlawful. The decision may reduce uncertainty around future tariff actions by limiting the ability of any administration to implement trade measures without congressional approval. Read the section on What does Scotus IEEPA Ruling Mean for Investors below.
Energy markets were volatile as tension between the U.S. and Iran escalated into regional conflict. Crude oil prices moved sharply higher, increasing the risk of broader inflation pressures. The length of the conflict—and its impact on supply—will be key drivers for markets going forward.
What does SCOTUS IEEPA Ruling Mean For Investors?
On February 20, 2026, the Supreme Court struck down the Trump Administration’s use of IEEPA to impose tariffs. Some investors expected a relief rally—but the market reaction was muted. Here’s why:
- The ruling was largely priced in. Since oral arguments in November, prediction markets had been assigning an 80%+ probability to this outcome, reducing the likelihood of a surprise market move.
- Tariff pressure had already been easing. Investors have become accustomed to viewing tariff threats as a negotiating tactic rather than a durable policy shift.
- Tariffs aren’t disappearing – they’re evolving. Immediately after the ruling, President Trump announced new global tariffs of 15% under Section 232, along with hints of additional measures designed to restore more aggressive trade barriers.
- Policy uncertainty persists. While the removal of IEEPA tariffs resolves one source of ambiguity, companies must still navigate a fluid trade environment.
For now, tariff policy is not the primary force driving volatility. Markets are reacting far more strongly to uncertainty surrounding the AI transition—its impact on tech valuations, productivity, labor markets, and potential regulatory responses. Trade policy matters, but it’s not at the center of today’s market narrative.
Are Software-As-A-Service Companies in Demise?
As artificial intelligence (AI) continues reshaping the economy, some of the market’s former tech favorites—especially software‑as‑a‑service (SaaS) companies—have seen their stock prices fall sharply, in some cases by more than 50% over the past year. The driving fear: AI‑powered coding agents could eventually make software development so efficient and inexpensive that SaaS firms lose the pricing power they’ve long enjoyed. In this scenario, software creation becomes commoditized, undermining the very foundation of the SaaS business model.
Whether this “SaaS‑pocalypse” ultimately materializes remains to be seen. For now, investors appear to be adopting a “sell now, ask questions later” approach—an instinct that has historically proven unwise during periods of technological transition.
Salesforce (CRM) is one of the clearest real‑world examples: its stock price fell more than 40% from its recent high as investors grew concern that new AI agents, like Anthropic’s Claude “Cowork,” could automate many workflows that Salesforce traditionally monetizes through per‑seat licensing. These AI agents can autonomously handle tasks like data entry, analytics, and workflow automation, raising concerns that companies may need to pay for fewer seats or could even build their own in-house alternatives. The sell‑off occurred even though Salesforce’s business fundamentals had not deteriorated at the same pace, illustrating how quickly markets are repricing long‑standing SaaS revenue models in response to AI‑driven automation risk.
At current valuations, some software stocks are trading at levels not seen in many years. Importantly, many SaaS products remain deeply embedded in their customers’ operations. These relationships tend to be sticky, resembling long‑term leases: difficult to unwind, mission‑critical to daily workflows, and supported by high switching costs.
In other words, while AI may reshape how software is built and deployed, it’s far too early to declare the demise of SaaS. The sector faces real challenges, but it also retains meaningful strengths—loyal customers, recurring revenue, and adaptability—that should not be discounted.
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