Software Stocks Are Innovating Like Their Lives Depend on It
Back in 1942, economist Joseph Schumpeter warned that capitalism bulldozes the old to build the new — and that rings true today. The AI-driven sell-off has sent State Street’s Software ETF down 22.8% this year, but there’s more brewing underneath the surface. While the sell-off lumps the category together, some firms are reinventing themselves harder than ever.
- Atlassian spent $2.7B on R&D last fiscal year, representing 51% of revenue — while Figma committed over $1B, an eye-watering 97%.
- Meanwhile, nine major software peers averaged just 19% of revenue on R&D — spending more on sales and marketing (27%) than on building new products.
Innovation Hail Mary: Amid a “complete risk-off mode,” investment manager Robert Wilson argues that markets aren’t rewarding innovators building for the emerging AI era. Even so, DA Davidson’s Gil Luria says, “Throwing money at the problem is not going to solve it,” arguing that making R&D more efficient, rather than expensive, is paramount. With and down 60.4% and 49% YTD, Wall Street doesn’t yet see the progress, and no one said it’s certain they’ll get to do the rebuilding.
