SaaS Stocks Face Reckoning as AI Shakeout Hammers Tech: Why Bank Shares Are Quietly Winning

There is carnage in tech land and the SaaS crowd is leading the retreat. The so-called ‘AI trade’ that made everyone look like a genius in 2025 has devolved into a full-blown rout, with software stocks getting dragged behind the barn and shot. The ‘Chart of the Day’ on Seeking Alpha calls it a ‘SaaS-Pocalypse’, and for once, the hyperbole is justified. The iShares Tech ETF, XLK, is stuck at $135.6, flatlining as the Nasdaq 100 futures flirt with their 200-day moving average. The algos have gone from buying every dip to selling every bounce, and the only thing holding up is the floor.

But here is the twist: while tech is getting all the attention for its spectacular implosion, US bank stocks are quietly staging a comeback. January saw most US bank shares rally, almost as if the market is rediscovering the concept of ‘profitable lending’ after a decade of chasing SaaS multiples. The rotation is subtle but real, money is leaking out of high-multiple tech and into boring old banks. The market is telling you something, and it is not whispering.

The timeline is brutal. Tech stocks started the year with a whimper, not a bang. The AI narrative, which was supposed to be the rising tide, has turned into a millstone. Earnings from Amazon and other tech giants have disappointed, with after-hours selloffs erasing billions in market cap. The Nasdaq 100 is now testing its 200-day moving average, a level that has not been breached in over a year. XLK, the tech ETF, is frozen at $135.6, with no sign of life. The MoneyShow chart captures the carnage: YTD performance for software stocks is deep in the red, and the pain is spreading. Meanwhile, the CNN Money Fear and Greed Index is stuck in the ‘Fear’ zone, and sentiment is deteriorating by the day.

Contrast that with US banks. January saw a broad-based rally in the sector, with most bank stocks posting gains even as tech melted down. The rotation is not just anecdotal, it is showing up in the flows. ETF data shows money moving out of tech and into financials, a trend that has not been seen since the pre-pandemic era. The market is sniffing out a regime change, and the implications are profound. For the first time in years, value is beating growth, and the old rules are back in play.

The macro backdrop is adding fuel to the fire. The Federal Reserve held rates steady at 3.50%, 3.75% in January, but the market is starting to price in fewer cuts for 2026. That is bad news for tech, which is addicted to cheap money, but great news for banks, which make more money when rates are higher for longer. The AI bubble is deflating, and the survivors are the ones with real earnings and real balance sheets. The ‘private markets AI panic’ is bleeding into public markets, as investors finally realize that ‘recurring revenue’ is not the same as ‘risk-free cash flow’. The unwind is just getting started.

The historical parallels are instructive. The last time we saw a rotation like this was in 2000, when the dot-com bust gave way to a multi-year run for financials and industrials. The setup is eerily similar: overvalued tech, rising rates, and a sudden rediscovery of value. The difference this time is the scale. The AI trade was bigger, faster, and more levered than anything we have seen before. The unwind will be just as violent.

Cross-asset correlations are breaking down. Tech is moving to its own rhythm, decoupling from the broader market. The Nasdaq is underperforming the S&P 500 for the first time in years, and the pain is concentrated in the software names. Meanwhile, banks are quietly outperforming, with regional lenders leading the charge. The divergence is stark, and the market is sending a message: the era of ‘growth at any price’ is over.

Strykr Watch

The technicals are ugly for tech. XLK is stuck at $135.6, with resistance at $140 and support at $130. The Nasdaq 100 futures are testing their 200-day moving average, a level that has acted as a line in the sand for bulls. If that breaks, look out below, there is not much support until the $120 zone for XLK. The RSI is oversold, but not extreme, suggesting there is more room to fall. Bank stocks, on the other hand, are breaking out. The regional bank ETF is above its 50-day and 200-day moving averages, with momentum building. The rotation is real, and the technicals back it up.

The risk is that the tech unwind accelerates. If the Nasdaq 100 loses its 200-day moving average, the selling could cascade. The options market is pricing in elevated volatility, and the VIX is creeping higher. The other risk is macro: if the Fed surprises with a hawkish tilt, both tech and banks could get hit. But for now, the pain is concentrated in tech, and the rotation into banks is gathering steam.

The opportunity is in the rotation. Traders can look to short tech on rallies, with tight stops above resistance. Long bank stocks on pullbacks is the other side of the trade, with stops below recent lows. The risk-reward favors value over growth for the first time in years. The market is telling you to pay attention.

Strykr Take

The AI party is over, and the SaaS crowd is nursing a hangover. The rotation into banks is not a fluke, it is a regime change. Tech will bounce, but the leadership has shifted. Strykr Pulse 54/100. Threat Level 3/5. Play the rotation, not the narrative. The old rules are back, and the market is rewarding discipline over dreams.