Software stocks tumble as investors hit AI panic button

Much of this move is driven by fear around artificial intelligence (AI). Investors worry that new AI tools will replace parts of ‘traditional’ software business, especially software applications used directly by humans. Headlines about AI agents[1] taking over the tasks of traditional software platforms have led to a loss of investor confidence in software companies. However, software companies’ revenue and earnings expectations for 2026 remain solid. We therefore consider this crisis of confidence among investors to be mainly sentiment-driven. It reflects investor anxiety about who will capture AI‑related value – it does not mean that software companies are actually losing revenue today.

One area that sold off sharply is the information services business, including companies such as RELX, Wolters Kluwer, S&P Global, Moody’s and Thomson Reuters. Shares in these companies fell between 15–35% in a month, as investors feared AI could bypass their data and analytics platforms. Is this fear exaggerated? These companies operate in high‑stakes environments – regulation, compliance, auditing and financial analysis – where trusted, validated data is essential. They also have a very loyal customer base, with retention rates often above 90%. This suggests their business models are more resilient than the market currently fears. Still, investors worry that a part of their business can be replaced by new AI tools.

At the same time, AI is splitting the software world in two. Software tools that depend on the number of employees using them – like CRM dashboards or helpdesk software – face pressure as AI agents can automate part of that work. Many SaaS companies (Software-as-a-Service) charge per license, with one license for everyemployee who uses the tool. If AI agents start doing tasks instead of humans, the number of employees using that software will fall. As a result, fewer licenses are needed, meaning less revenue for the software vendor. So, once AI replaces or automates human tasks, license-based pricing models come under pressure.

But the story is different for companies providing the underlying infrastructure of IT systems. Databases, authentication, logging, and cybersecurity become more important, because AI agents generate far more work ‘behind the scenes.’ When people use software, they work at a natural human pace – clicking, typing and updating information only a few times per minute. Each action triggers a limited number of technical follow-up steps that need to be taken in the background. AI agents behave completely differently. They operate at machine speed. Instead of a handful of actions, an AI agent can run hundreds or even thousands in the same amount of time. Every action must still be checked, logged and monitored – tasks placing much higher demands on the underlying IT infrastructure. Companies supplying that infrastructure could therefore benefit from the rapid work pace of AI agents.

The recent market sell-off seems to be more dramatic than the expected earnings and revenue performance of software companies justifies. AI is not going to dismantle the software sector; instead, it will reshape it. Demand could increase for the products and services offered by enterprise platforms (platforms integrating all business applications in one system), vertical software solutions (software tailored to meet the requirements of a specific industry), data‑rich information providers and companies providing the infrastructure that enables AI to operate at a larger scale. At the same time, pressure will persist for license‑based SaaS models and labour‑intensive IT services. The volatility triggered by investors’ growing wariness towards software companies creates real risks. But it also opens opportunities for investors who can look through the noise and focus on where value is actually being created.

Joost Olde Riekerink
Equity Research & Advisory Expert