Investing.com -- The decline in software stocks over the recent days has earned substantial profits for those betting against the sector.

This selloff, driven by concerns that advancements in AI technology could disrupt traditional software business models. has generated $24 billion in paper gains for short sellers betting against these companies, according to data from S3 Partners LLC.

"This is a software-specific phenomenon; the broader Mag 7 is essentially unchanged," said Leon Gross, S3's director of research, in a note to clients.

The software sector has faced mounting pressure for months as investors worry about AI's potential negative impact on core business operations. These concerns intensified on Monday when Anthropic PBC introduced a new productivity tool, triggering a fresh selloff. Overall, software and artificial intelligence-related stocks have fallen roughly 20% since the start of the year

As the downturn continues, short sellers are expanding their positions against the sector. Companies experiencing increased short interest include Microsoft Corp., Oracle Corp., Broadcom Inc., and Amazon.com Inc.

Microsoft has seen short interest jump by 20% this year, while Oracle has experienced a 10% increase, according to S3 data. Broadcom and Amazon have also seen rising short interest levels.

Gross noted that Microsoft typically "behaves like a reversal stock, with shorts covering on the way down," but the current situation is different. "Now it is trading like a momentum-driven, distressed name, with shorts increasing into weakness," he said.