Following a sharp decline in software stocks, perceived as threatened by the rise of artificial intelligence tools, Wall Street is reassessing the possibility that these assets have been oversold. Meanwhile, individual investors are actively buying the dip. According to Scott Rubner, Head of Equity and Equity Derivatives Strategy at Citadel Securities, retail traders have set a new record for expenditure on software stock purchases through the Citadel Securities platform. The firm has been tracking this data since 2017.

In a report to clients on Tuesday, Rubner stated, "Net notional volumes on our platform have reached unprecedented levels. The scale, duration, and breadth of the buying activity significantly exceed prior peaks, highlighting the role of retail investors as a primary source of new demand in early 2026."

The sell-off impacted a wide range of companies, from small software developers to large wealth management firms, after Anthropic PBC introduced an efficiency tool designed for corporate legal teams. Stocks in the legal software and publishing sectors subsequently experienced steep declines. The downward trend intensified further following Altruist Corp.'s launch of a tax strategy tool, which contributed to share price drops for Charles Schwab Corp. (SCHW.US) and LPL Financial Holdings Inc. (LPLA.US).

The broad sell-off in the software sector rippled across the market, prompting investors to divest from companies perceived as vulnerable to displacement by AI technology, even if the risk was considered minimal.

While professional investors, including hedge funds, increased their short selling at a record pace, retail investors adopted a contrary view, seizing the opportunity to buy during the downturn.

From January 2nd to February 13th, the average daily dollar volume of U.S. equity demand on the Citadel Securities platform was approximately 25% higher than the peak levels seen in 2021 and about double the average from 2020 to 2025.

Retail demand is no longer confined to the technology sector. Year-to-date data from the firm indicates this group now shows a preference for sectors such as Materials, Real Estate, Financials, Communication Services, and Industrials.

This momentum has also extended beyond the cash equity market. Retail participation in the options market has reached historically high levels in 2026. Average daily options trading volume year-to-date is nearly 50% higher than the 2020-2025 average and over 15% above the level from the same period last year.

Rubner wrote, "Over the past 42 weeks, retail options investors have been net buyers in 41 of those weeks. This consistency suggests a persistent risk appetite rather than sporadic positioning changes."