The assumption that the software industry’s future will keep shining bright is proving dangerously naive. Once seen as unshakable, major software names are now caught in the crossfire of rapid advances in artificial intelligence from disruptors such as OpenAI, Google, and Anthropic.
Giants like Salesforce and Workday long considered safe bets are now seeing their share prices wobble as investors struggle to gauge how AI might erode traditional software profits. Yet many bullish investors still seem unwilling to grasp the full picture.
Despite a steep sell-off, analysts have been slow to adjust their earnings expectations for software firms. Incredibly, consensus forecasts for future profits have even ticked higher, even as AI encroaches on their business models almost daily.
Goldman Sachs strategist Ben Snider recently highlighted that while the iShares Expanded Tech-Software Sector ETF (IGV) has dropped 24% in just three months, two-year forward earnings estimates for those same companies are up around 5%. Sectors also vulnerable to AI’s rise including advertising and insurance brokerage have also seen upgraded outlooks for 2026 earnings.
Wall Street’s optimism looks misplaced. Falling share prices tend to reveal the truth behind market sentiment, and the downward slide in software stocks hints at deeper structural challenges. Until analysts recalibrate expectations to reflect AI-driven disruption, the bottom for these stocks may remain elusive.
“Just a short time ago, software names were trading around 35 times earnings, and now they’ve dropped below 20,” noted Tim Urbanowicz, chief investment strategist at Innovator Capital Management, in an interview on Yahoo Finance’s Opening Bid. “That’s the darker side of AI. It’s shaking up industries faster than expected. And even if the impact doesn’t fully show up this year, investors need to stay alert.”
He added, “This is going to unsettle investors. Growth won’t just keep moving upward in a straight line.” At least some on Wall Street are beginning to acknowledge the threat.