"The sell-off hit everything wearing a software badge. Gaming. Legal services. Brokerages. Trucking. Cybersecurity. The thesis driving it: the same AI technology that was supposed to save software companies is now what is threatening to kill them."
"AI isn't just getting smarter. It's getting plugged directly into enterprise systems through open integrations, with no standards governing what it can access or what it can do. The agents making PowerPoints are now inside enterprise software, doing the work those companies used to charge for."
"Salesforce (NYSE:CRM) is down 26% year-to-date despite posting a 24.9% EPS beat last quarter and $800 million in Agentforce ARR growing 169% year-over-year. CrowdStrike (NASDAQ:CRWD) is off about 21% year-to-date despite reporting record net new ARR of $265 million, up 73% year-over-year."
The software sector experienced severe losses, with the iShares Expanded Tech-Software ETF (IGV) declining nearly 23% year-to-date while the broader tech index remained relatively flat. Major software companies like Salesforce, CrowdStrike, and Unity Software posted strong earnings and growth metrics yet saw significant stock declines. The primary driver is concern that AI technology, now being integrated directly into enterprise systems through open integrations, threatens to cannibalize traditional software company revenues. AI agents are performing work that software companies previously charged for, creating uncertainty about future profitability despite current strong financial performance.
#software-sector-decline #ai-disruption #enterprise-software #market-valuation-disconnect #technology-stocks
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