If you are heavily invested in software stocks, the last six months have probably not been much fun. As of April 27, project management company Atlassian (TEAM) has plunged 58% over the past six months. Enterprise AI provider C3.ai (AI) has dropped 52%. Voice AI company SoundHound AI (SOUN) has also fallen 55%.
The market’s reasoning? AI will kill all traditional software. But the truth may be exactly the opposite — this is not the end for software stocks, but a rare “clearance sale”.
Meanwhile, money has flooded into AI infrastructure — memory chip maker Micron Technology (MU) has soared 154% over the same period, while chip giant Intel (INTC) has risen 130%.
The logic behind this sell-off is straightforward: AI will commoditize software. Generative AI, in particular, will eat the current software industry. Why pay for Atlassian when an AI agent can just manage projects? Why license a next-generation database when AI can conjure data from the ether?
The logical endpoint is that every software-as-a-service (SaaS) company becomes obsolete, replaced by a single prompt box that does everything. That single system might get expensive, but that’s OK as long as it can replace a plethora of older software solutions. Investors, not wanting to be the last ones holding the bag, have fled.
AI will absolutely change the software industry. But it won’t vaporize companies that have built durable competitive advantages. Take a closer look at what these beaten-down names actually do:
The market is pricing these stocks as if the generative AI disruption has already happened. It hasn’t.
What has happened is that you can now buy these former high-growth stories at half price or less. These companies’ businesses haven’t changed; sentiment has. This is not a crisis. It’s a clearance sale. You might want to take another look at these strong SaaS names while they are still cheap.
