Software Shares Among the Most Oversold Stocks in the S&P 500 Amid Market Volatility
January 31, 2026 – By Pia Singh
Software stocks have emerged as some of the most oversold names in the S&P 500 this week, reflecting broader market turbulence compounded by investor concerns surrounding technological competition and mixed earnings results. Notable software firms such as Intuit and Palantir faced steep declines as major stock indexes grappled with uneven performances.
Market Overview
The stock market endured a rocky week as losses in the technology sector weighed heavily on major indices. The S&P 500 eked out a modest gain for the week, while both the Nasdaq Composite and Dow Jones Industrial Average closed in negative territory. The Dow was particularly dragged down due to a significant sell-off in UnitedHealth Group shares.
Investor sentiment soured following mixed earnings reports from the so-called “Magnificent Seven” tech companies, which tempered enthusiasm about the ongoing bull market rally. Technology stocks, especially in the software sector, sold off sharply, with several names dropping into bear-market territory by Thursday.
What Does Being ‘Oversold’ Mean?
Stocks are typically considered oversold when their 14-day Relative Strength Index (RSI) falls below 30, signaling that they have experienced heavy selling pressure and might be poised for a near-term rebound. Conversely, stocks with an RSI above 70 are seen as overbought and more vulnerable to declines.
This week, many software companies registered an RSI below 30, highlighting significant market pessimism that may present potential buying opportunities for investors.
Key Software Stocks Under Pressure
Among the most oversold software stocks is Palantir Technologies, which shed more than 13% during the week, reversing much of its rally over the previous year. The decline is partly attributed to fears about increasing competition from artificial intelligence (AI) technologies disrupting traditional software business models.
Rishi Jaluria, an analyst at RBC Capital Markets, reaffirmed his underperform rating on Palantir with a $50 price target on January 26, suggesting a potential downside of 67%. Jaluria noted, “Absent a substantial beat-and-raise quarter elevating the near-term growth trajectory, the valuation seems unsustainable.” Palantir is scheduled to report its earnings after markets close on Monday. The stock’s current RSI stands at 26.3. Other major software firms in oversold territory include Intuit, Paycom Software, Tyler Technologies, Salesforce, and ServiceNow. Despite ServiceNow beating Wall Street’s fourth-quarter earnings expectations and offering positive guidance, the stock plunged over 12% on continued fears that AI advancements could disrupt established software models.
Contrasting Overbought Names: Memory Stocks Surge
In contrast to the software sector’s selloff, memory chip stocks exhibited strong gains and are classified among the most overbought stocks this week, with RSIs well above 70. SanDisk led the charge with a 22% weekly jump following its second-quarter earnings report, which highlighted a 64% growth in its data center business. The company also issued robust guidance for the third quarter. SanDisk’s RSI soared to 88.4, reflecting heightened investor optimism amid tight supply and elevated prices.
Similarly, Lam Research shares rose 7%, and Micron posted a 4% gain for the week. Data storage provider Seagate Technology also outperformed, jumping nearly 18% after reporting strong fiscal second-quarter results, with its RSI approaching 80. Raymond James analysts have upgraded SanDisk to an outperform rating, citing the company’s pricing power as a key factor in the ongoing bullish sentiment in memory stocks.
What This Means for Investors
The divergent trends in software and memory stocks highlight the complexities of the current technology market landscape. While software companies are being hit hard on fears of AI disruption and valuation concerns, memory chip manufacturers benefit from surging demand tied to data center growth and supply constraints.
Investors looking for potential turnaround plays may find opportunity in oversold software stocks if upcoming earnings reports demonstrate stronger-than-expected growth. However, caution is advised as the market continues to digest the implications of AI and evolving technology trends.
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Data is accurate as of January 31, 2026. All stock information is delayed by at least 15 minutes.