Software stocks plunged yesterday while semiconductors take off, with $iShares Expanded Tech-Software Sector ETF(IGV)$ down 2%. Major names like $ServiceNow(NOW)$ , $Snowflake(SNOW)$ , $Intuit(INTU)$ , and $CrowdStrike Holdings, Inc.(CRWD)$ all dropped.
The sharp decline was mainly triggered by $Broadcom(AVGO)$ CEO Hock Tan, who stated yesterday that
the company would not invest in the software sector going forward, citing uncertainty brought by AI's impact on software.
This bearish view stands in contrast to bullish calls from major institutions:
Wayve Capital’s Chief Strategist: “Software stocks provide a safe haven against tariffs — they’re the winners.”
Morgan Stanley: “The CHIPS Act reinstates immediate R&D expensing, giving software companies a cash flow boost.”
BlackRock: “Software stocks will be at the core of the next big breakout in the AI wave.”
So, why has the AI + SaaS narrative suddenly shifted?
Generative & Agentic AI Are Disrupting the SaaS Model
A structural shift is underway — from "human + software" to "AI agents + APIs." OpenAI’s latest o3 model saw costs drop by 80% in just two months, while accuracy improved.
Within 3 years, a large number of routine digital tasks could be taken over by AI.
AI Has Already Penetrated Core SaaS Scenarios
These aren’t just demos — real applications are live now:
Cursor: AI code editor that writes code automatically
ServiceNow: AI handles customer support tickets
Workday: AI assists with preparing journal entries
Adobe Experience Cloud: AI writes ad copy
Currently, we may still be in the "AI-enhances-SaaS" phase. But in the future, if software companies fail to catch up, AI may start cannibalizing their market share.
How do you view SaaS plunge?
Is it a dip buying chance?
Or will you shift to semi stocks?
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