Celebrity investor Michael Varley is re-entering depressed software stocks, believing the recent decline in stocks is due to technology rather than deteriorating business fundamentals. The “Big Short” investor said in a post on Substack on Wednesday that a “reflexive positive feedback loop” between declining stock prices and stress on bank debt associated with software companies has helped accelerate the decline in stocks, and he now sees it as a buying opportunity. “I don’t think the technical pressures brought on by private credit and software debt issues will be large enough to impact these stocks long term,” he said. The return to the stock market comes amid growing concerns that artificial intelligence could upend much of the software industry, shaking business models and long-held growth assumptions. The iShares Expanded High-Tech Software Sector ETF, for example, is down about 28% from its peak in September, pushing the group into a bear market and highlighting how quickly sentiment has deteriorated in what was once one of Wall Street’s favorite sectors. IGV 1Y Mountain iShares Expanded Technology Software Sector ETF 1 Year Mr. Berry disclosed that he opened an approximately 3.5% position in PayPal, while maintaining holdings in Fiserv, Adobe, Autodesk, and Veeva Systems. He said early Thursday that he plans to add positions at Salesforce and MSCI. None of these companies rely on private credit markets, Barry said. Retail investors have been pulling money from a group of private credit funds in recent months, with many of the loans tied to software companies. “We’re seeing a few companies that are severely impacted by advanced (large-scale language models) for specific business model reasons,” Barry said. “I don’t see this in the companies I have chosen, or in many others, but I have almost completed a forensic, competitive, and fundamental analysis of the potential investment.”
