Software stocks have tumbled in recent months as investors grow increasingly worried that AI could upend traditional software business models.
Companies in the sector within the S&P 500 (^GSPC) are down roughly 18% over the last six months, while the index itself is up 9% over that time frame. The biggest losers of the group include SAP (SAP), which is down 30%, as well as Salesforce (CRM) and ServiceNow (NOW), which have shed about 20% and 40%, respectively.
“Software sentiment has rarely been lower, with AI casting a shadow of uncertainty for the sector,” Jefferies analyst Charles Brennan wrote in a note to investors earlier in January.
Read more about software stock moves and today’s market action.
That shadow of uncertainty has two prongs. For one, investors worry that software-as-a-service (SaaS) firms’ customers could develop in-house software solutions using AI tools from large language model providers like Anthropic’s Claude Code, reducing their reliance on providers like Salesforce. The recent release of Anthropic’s new autonomous digital assistant Claude Cowork has only accelerated that fear.
Second, there is concern that AI is lowering barriers for entirely new enterprise software startups — including companies like Aurasell and Artisan AI — whose AI-native platforms could directly challenge the competitive advantages of established firms.
Older software players have raced to introduce agentic artificial intelligence offerings as they look to create AI tools that can not only generate answers but also take actions in the hopes of defending their core platforms from upstart rivals. But the platforms — such as Microsoft’s Copilot, Salesforce’s Agentforce, Snowflake Intelligence — are still getting off the ground.
“The SaaS companies are wholeheartedly embracing agentic AI and putting a lot of investment dollars into this, but adoption is going really slowly,” explained Macquarie analyst Steve Koenig.
“ You’ve got this disconnect between what the enterprise software companies are saying and the reality of agentic AI on the ground,” he continued.
In calls following earnings reports from Microsoft (MSFT), ServiceNow, and SAP on Wednesday, CEOs emphasized how their companies are benefiting from AI. ServiceNow CEO Bill McDermott argued that “AI doesn’t replace enterprise [software]” but “depends on it.”
Still, the three software stocks continued to plunge on Thursday — as did those of fellow enterprise software sellers Salesforce, Snowflake (SNOW), Intuit (INTU), and Datadog (DDOG), among others.
