TLDR: Software company shares have experienced a significant decline, attributed to growing investor concerns regarding the disruptive potential of AI coding tools to enable faster and cheaper software development. Major players like Monday.com, SAP, Salesforce, and Workday have seen substantial drops, reflecting a broader market anxiety about AI’s long-term impact on traditional software business models.
The global software sector is currently navigating a turbulent period, with shares experiencing a notable downturn as investors grapple with the potential ramifications of advanced artificial intelligence (AI) coding tools. This apprehension stems from the belief that AI could fundamentally alter software development, making it quicker and more cost-effective, thereby impacting the profitability and business models of established software companies.
Leading the declines, Monday.com saw a sharp 30% drop on Tuesday, August 13, following a cautious revenue forecast despite beating second-quarter earnings expectations. The project management software firm’s GAAP operating margin slipped to -3.9% from a positive 0.8% a year prior, and its free cash flow margin also declined. Year-to-date, Monday.com’s stock is down 21.5%, trading 44.7% below its February 2025 52-week high of $327.92.
The selloff was not isolated. European software giant SAP experienced a 7.1% decline, wiping out an estimated €22 billion ($26 billion) in market value. Salesforce and Workday also saw their shares slide on Monday, August 12. Smaller industry players such as Sage Group, Dassault Systemes, Nemetschek, and Sinch reported drops of 5.4%, over 2%, over 7%, and 3.7% respectively, underscoring the widespread nature of investor anxiety.
Analysts are closely monitoring the situation. RBC Capital analysts noted that ‘software valuations remain under pressure from the ‘death of software due to AI’ narrative, which likely drives continued volatility in the short term.’ Jefferies analyst Brent Thill, while acknowledging that ‘the fear is overblown,’ conceded that ‘investors are fearing that AI is going to eat software and multiples are going to fall apart,’ reflecting the current market sentiment. Melius Research also downgraded Adobe, citing AI as a potential threat to the Photoshop-maker.
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Adding to the concerns, Gartner, a prominent IT consultancy, recently reduced its full-year outlook, a move analysts have linked to increased competition from AI research tools. The broader context reveals that software is currently among the weakest performers within the tech sector this year. The core of investor concern lies in AI’s evolving role in computer programming, offering developers new toolkits for brainstorming, writing, refining code, and fixing bugs, which could disrupt traditional software development paradigms and business models.
