The software sector, represented by the iShares Expanded Tech-Software Sector ETF (IGV), has seen a significant sell-off, with stocks like Microsoft and Palantir experiencing substantial declines from their all-time highs. This downturn is attributed to fears surrounding AI's potential to replace human workers and its impact on the software-as-a-service (SaaS) business model. While SaaS is not expected to disappear entirely, its profit pool is projected to shift towards AI agents, which are seen as more efficient and cost-effective. Companies that can leverage AI to offer lower costs and retain customers are likely to outperform, while those with high valuations and weak moats face increased scrutiny. Investors are advised to look for companies with strong fundamentals, high switching costs, and clear AI monetization paths.