(Investorideas.com
Newswire) a go-to platform for big investing ideas, including AI
and tech stocks issues market commentary from deVere Group.
The software selloff is investors’ real-time repricing of
the sector in the AI age, asserts the CEO of one of the
world’s largest independent financial advisory
organizations.
The stark analysis from Nigel Green of deVere Group comes as a
new AI automation tool from Anthropic sparked a $285 billion plunge
in big-name stocks across the software sector.
He says: “The selloff is not about fear of AI —
it’s about what software businesses can realistically charge
in an AI-first world.”
“When AI agents can perform legal review, data analysis,
research and compliance instantly, subscription-heavy models lose
pricing leverage.”
“Investors are reassessing whether decades-old assumptions
around recurring revenues still hold.”
“The sharp falls in software stocks reflect a market
recognizing that margins, not innovation, are now the
battleground.”
The scale and speed of the declines underline how abruptly investor
thinking has shifted.
Software companies long valued for predictable subscription
income, entrenched workflows and information advantages are now
being judged against a different standard: how defensible those
revenues remain when AI can replicate outputs faster, cheaper and
with minimal friction.
Markets are increasingly questioning whether software
businesses built around information resale, process automation or
labour substitution retain meaningful scarcity value.
Tasks that once justified premium pricing and long-term contracts
are being compressed by AI systems that can deliver comparable
results in seconds.
As a result, the traditional logic underpinning software
valuations is coming under sustained pressure.
Nigel Green notes that this represents a fundamental change in how
investors assess technology risk. The assumption that digital
products naturally enjoy durable pricing power is being challenged
as automation strips complexity out of workflows.
“It is a valuation reset driven by economics. AI forces
investors to examine what customers are actually paying for, and
whether those services remain differentiated when intelligent
systems become widely available.”
He continues: “Markets are drawing a clear distinction
between companies that genuinely control AI economics and those
that simply integrate AI to protect existing businesses.”
“The former can potentially expand margins, while the latter
risk seeing cost savings passed directly to clients.”
“Markets are, it seems, penalizing firms that rely on
legacy platforms, high headcount or process-heavy models that can
be bypassed entirely.”
Another factor weighing on valuations is the rapid erosion of
switching costs. As AI systems improve, the friction that once
locked customers into long-term software contracts weakens.
Outputs become more standardised, competition intensifies and
customer loyalty becomes harder to monetize.
Nigel Greens adds that the selloff reflects a growing
recognition that “AI compresses value chains and
concentrates returns.” A small number of firms, he explains,
will “capture disproportionate gains, while a far larger
group will struggle to defend pricing power.”
He concludes: “AI removes the insulation that once protected
software margins.”
“What looked like stable, recurring revenue is increasingly
exposed.
“Investors aren’t waiting for earnings warnings
or guidance cues. They’re repricing now, because AI
accelerates disruption faster than quarterly results can
capture.”
