By Jacob Sonenshine
Software stocks are finally making a tentative comeback after being pummeled by fears that artificial intelligence could siphon business away. But investors could soon find out who the real losers from AI will be.
The iShares Expanded Tech-Software Sector Exchange-Traded fund -- which owns large software names such as Microsoft, Oracle, Salesforce, Adobe, and Palantir -- is up 12% since late February, after a brutal monthslong selloff.
The market is concerned that the privately-owned AI pioneers Anthropic and OpenAI will take market share from the many software vendors that provide tools to businesses and people. The industry's early recovery comes as bargain hunters take a chance on these beaten-down names, betting that some can still thrive despite AI.
The market, however, might find out soon enough which software players will actually lose ground to AI -- contrary to the idea that any potential loss of market share is years away. If that happens, these stocks' rebound could quickly reverse.
Anthropic, which provides Claude, reportedly has $19 billion of annual recurring revenue. OpenAI, the parent company of ChatGPT, reportedly has over $20 billion. They're both growing rapidly: Their combined ARR is nearly 3% of the $1.43 trillion of total U.S. software spending Gartner expects for this year. So it likely won't be long before lost market share shows up in software incumbents' earnings or guidance.
"I would say very soon there could be some impact," says Needham analyst Josh Reilly, who sees the possibility that many winners and losers from all of this will surface in "several quarters."
Which ones will suffer is difficult to say, but we know who the top suspects are, based on how their stocks have traded and their differing business models.
Two examples are sales and marketing data organizers Salesforce and HubSpot, whose stocks are down 46% and 66%, respectively, from record highs. As a small anecdote of just how threatened their business models are, asset manager IDX Advisors' chief investment officer Ben McMillan told Barron's his firm has gotten rid of much of the Salesforce product it had been using -- instead coding in Claude to prioritize which potential clients are worth reaching out to for business. Salesforce and HubSpot didn't immediately respond to request for comment.
HubSpot stock has bounced 32% from the latest selloff's low, while Salesforce has bounced 10%. It's difficult to say whether these two will actually lose out to AI or emerge unscathed, but they are two examples that carry the risk of losing market share and thus further stock declines.
Barron's wrote bullishly about Salesforce in late December -- and we've been wrong so far. The stock has fallen 26% since then.
In terms of likely winners, we've recently written that cybersecurity stocks that have slid with the rest of the software group look too beaten down. The thesis in a nutshell: Claude and OpenAI are less likely to create the kind of sophisticated firewalls and other cyber products that Palo Alto Networks and CrowdStrike provide soon -- making those stocks look attractive.
We're now in a moment in which we are reassessing the software landscape. But the rubber will likely hit the road for software soon.
Don't be surprised to get answers -- and large stock price moves -- fairly soon.
Write to Jacob Sonenshine at jacob.sonenshine@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
March 04, 2026 15:16 ET (20:16 GMT)
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