Software Stocks Are Crashing - What's Going On?

Published first at https://www.3minutebreakdowns.com Software stocks have had a brutal week with many of the world’s leading software companies down double digits from their highs. Adobe is off 58%, Salesforce 41%, ServiceNow 47%, LegalZoom 78% and Figma more than 80%. In fact, right now it’s hard to find a software stock that hasn’t been affected. Historically, the software industry has been incredibly lucrative for investors, largely due to capital light business models, high margins and recurring revenue. But pressure has been building for some time as investors worry about the disruptive impact of artificial intelligence. The core fear is simple: AI lowers barriers to entry, compresses pricing power and it will make some products obsolete. Matters came to a head this week after Anthropic’s Claude rolled out a new suite of AI plugins that can do many complex white collar tasks in fields like sales, finance and legal. Of course, not everyone thinks AI is such a threat. Nvidia CEO Jensen Huang said “The notion that AI is somehow going to replace software companies is the most illogical thing in the world” And the latest selloff has been so broad, that there are bound to be some bargains to be found in the rubble. ABOUT ME Joe is the original founder of 3-minute Breakdowns and editor for Overlooked Alpha, the number one newsletter for overlooked investing ideas and stock market analysis. Joe evaluates companies from a business-first perspective, searching for things that the market has got wrong and waiting for the 'fat pitch'. LINKS My website: https://www.3minutebreakdowns.com/ Koyfin charts: https://www.koyfin.com/affiliate/overlooked-alpha/?via=3mb TikTok: https://www.tiktok.com/@overlookedalpha X: https://x.com/OverlookedAlpha DISCLAIMER & DISCLOSURE This content is for educational and entertainment purposes only. 3-Minute Breakdowns is not a registered investment advisor and does not provide financial recommendations (only opinions). The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. All investing involves risk, including the possible loss of principal. The author reserves the right to buy and sell or change his position in a particular stock at any time. This description contains affiliate links that allow you to find the items that I personally use and recommend. Thank you for your support.