Key Highlights

● Wix fell Friday with no company-specific news, moving with the software sector.

● In a 45-stock software basket, 41 names fell, erasing roughly $130 billion in value.

● Investors moved from asking what AI can do to asking how it will be financed.

● Meta, IBM and SAP report October 21, and the Fed decides October 28.

Moving with the group

Wix.com (NASDAQ:WIX) fell in Friday's session, finishing among the notable decliners on the Nasdaq Composite, according to market data. No company-specific news was reported. Market reports said the shares moved with the software sector, which suffered one of its heaviest selloffs in recent weeks.

Wix provides a cloud-based platform that lets individuals and businesses build and manage websites, online stores and digital marketing tools without needing to write code. It earns most of its revenue from subscriptions, a model that has historically made software companies attractive to investors but also leaves their valuations sensitive to changes in sentiment and interest rates.

Software stocks hit hard

The software rout was broad. Wix fell alongside UiPath (NYSE:PATH), SentinelOne (NYSE:S), Amplitude (NASDAQ:AMPL) and Commvault (NASDAQ:CVLT), all of which also moved with the sector. In a 45-stock software basket, 41 names fell, erasing roughly $130 billion in market value. The IGV software ETF sank sharply by the close after being only modestly lower earlier in the session.

Larger names fell too. Salesforce (NYSE:CRM) and ServiceNow (NYSE:NOW) dropped. Snowflake (NYSE:SNOW) tumbled late in the day, and Palantir (NASDAQ:PLTR) erased about $34 billion to $35 billion in market value, according to several reports. Declines were also reported in HubSpot (NYSE:HUBS), Datadog (NASDAQ:DDOG) and Okta (NASDAQ:OKTA).

The AI-financing debate

Behind the selling was a shift in how investors view the artificial intelligence trade. Market commentary said investors moved from asking what AI can do to asking how it will be financed. Debt-funded AI infrastructure companies such as CoreWeave (NASDAQ:CRWV) were hit hardest, and the caution spread into software.

One market commentator said, "That is a change in character, and it's another reason the leaders no longer look like a safe haven." Goldman Sachs described hedge funds' selling of AI names as a "tactical rotation," according to market commentary.

Rates were another factor. The 10-year Treasury yield eased to roughly 5.1 at the close but stayed close to its highest levels since 2002, which it reached earlier in October. Elevated long-term yields reduce the value investors assign to future earnings, a particular headwind for growth-oriented software companies.

A difficult session for the Nasdaq

The Nasdaq Composite fell 572.99 points to 26,140.03, closing its worst week since the week ended June 26. The S&P 500 lost 84.62 points to 7,659.44, and the Dow Jones Industrial Average slipped 175.28 points to 52,002.41. The Russell 2000 fell 45.90 points to about 2,721.

Technology was the weakest sector, while energy, utilities and consumer staples gained. Stocks opened higher before selling built through the afternoon, according to market reports. The VIX rose 3.53 points to 19.99.

Wix Peers Meet Meta, IBM and SAP

On the economic front, University of Michigan consumer sentiment is due October 23. The Federal Reserve's next rate decision follows on October 28, with PCE inflation data on October 29.

Software investors will be looking to next week's earnings for signs that demand remains healthy. Meta (NASDAQ:META) reports on Wednesday, October 21, alongside IBM (NYSE:IBM) and SAP (NYSE:SAP). One analyst said "upcoming Big Tech earnings will still need to demonstrate that the enormous investment in AI is translating."