The software sector is experiencing a significant downturn, with many companies seeing their stock values plummet. This sell-off is largely attributed to the rapid advancements and widespread adoption of generative artificial intelligence, which is creating both excitement and apprehension in the market.
Box CEO Aaron Levie expressed that this is a “most exciting moment” for his company, despite a recent 17% drop in its stock. This decline mirrors a broader trend affecting cloud computing and software providers. The WisdomTree Cloud Computing Fund has fallen approximately 20% year-to-date, with some individual companies like HubSpot experiencing even steeper declines, down 39% this year and 42% in 2025. Figma, Atlassian, and Shopify have also seen significant drops of 40%, 35%, and 29% respectively.
This market reaction stems from the generative AI boom, fueled by innovations like OpenAI’s ChatGPT. New AI tools are capable of creating digital products such as apps and websites with remarkable speed and ease. Levie highlights a “cognitive dissonance” within the industry, where companies recognize the potential of AI to enhance their offerings while simultaneously grappling with broader fears of AI-induced obsolescence.
“It somewhat misunderstands this idea of where companies tend to spend their resources and their time and their energy,” Levie commented, suggesting that businesses prefer to outsource specialized functions like back-office software or customer relationship management to vendors rather than manage the associated liabilities internally.
Salesforce CEO Marc Benioff echoed this sentiment, emphasizing the value of having access to customer data and noting that Agentforce, a product designed to automate sales and customer service workflows, is the “fastest growing product I have ever seen in the history of Salesforce.”
Similarly, Bill McDermott, CEO of ServiceNow, stated that market concerns are misplaced and that ServiceNow’s products act as a “semantic layer that makes AI ubiquitous in the enterprise.” Dan Springer, former CEO of DocuSign and current CEO of legal software startup Ironclad, also believes that ServiceNow’s offerings are not yet replaceable by AI.
Despite these assurances, both Salesforce and ServiceNow have seen their market values decline by about a quarter this year. A significant catalyst for this accelerated sell-off has been the progress made by companies like Anthropic. Anthropic recently announced new capabilities for its Claude Cowork productivity tool, including legal, finance, and product marketing features, releasing these as open-source plugins to encourage customization. Claude is now competing directly with models from OpenAI and Google, focusing on enterprise subscriptions for widespread AI deployment.
Celso Pinto, senior director of product at The Access Group, expressed his admiration for the technology, having used Claude Cowork and Claude Code for tasks ranging from reviewing marketing copy to producing legal documents.
The market appears to be favoring infrastructure companies and leading AI model developers, viewing traditional software companies as potential losers, irrespective of their current business strength. Anthropic recently secured a $10 billion funding round at a $350 billion valuation, while OpenAI is reportedly eyeing a valuation exceeding $800 billion. Google’s parent company, Alphabet, has also seen its stock surge, increasing its market capitalization to $4 trillion.
However, some investors and analysts maintain a more optimistic outlook for established software companies. Stifel analysts, in a recent report on HubSpot, noted that the CRM company’s business appears stable, with no immediate signs of AI-related headcount reductions or seat disruptions among their surveyed partners. They recommend buying HubSpot stock.
Cantor analysts covering Monday.com, a project management software provider, view its current 29% stock drop this year as an “attractive setup,” highlighting the company as a “profitable grower benefiting from digital and AI collaboration secular growth trends” and maintaining a buy rating.
Bessemer Venture Partners’ Byron Deeter, an early investor in Box, advocates for a “buy-the-dip” strategy, stating, “Chaos creates opportunity! A lot of money is about to be made for those who have the conviction to place the right private and public software bets right now.”
At Box, Levie emphasizes that all software companies must rapidly integrate AI to remain competitive. “AI is causing every software company to have to stay on its toes,” he said. “It is certainly forcing every incumbent to make sure that they’re doing more for their customers. I think that’s an incredible thing for the market and for IT buyers.”
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