The Software Sector Is Under Pressure as AI Begins Taking Over Its Core Work
Software companies got a harsh reminder that AI giveth and AI taketh away. Shares of software companies fell this week after reports that Amazon Web ServicesAMZN is building AI agents to handle sales, business development, and other core tasks. That’s the same work these companies are built on, and it’s dragging the broader software sector into its worst stretch since 2008.
The automation wave: AWS isn’t just building AI for customers anymore, it’s using it on itself. The company has an agent that can handle work once done by thousands of specialists in areas like cybersecurity and networking, freeing up sales teams to focus on bigger deals. It pulls knowledge from across AWS so employees can focus on more complex problems. As AWS starts driving that disruption, investors are pulling back, with private equity firms like Ares and Apollo already limiting withdrawals over concerns tied to software companies exposed to AI.
- UiPathPATH, HubSpotHUBS, and AtlassianTEAM led the selloff as investors reassessed AI’s threat to traditional software models.
- Anthropic added fuel, rolling out Claude AI that can control computers, open apps, browse, and fill spreadsheets, now available to Pro and Max users.
The AI Saving Grace
While Wall Street worries about what AI could do to software companies, finance chiefs are seeing something very different. At WSJ’s CFO Council Summit, executives pointed to real efficiency gains from generative AI, in some cases worth millions. ServiceNowNOW CFO Gina Mastantuono said AI has already delivered $355M in savings, with about $125M flowing straight to the bottom line. And it’s not just cost savings showing up on paper:
- Levi StraussLEVI built an AI agent that processes wholesale orders in minutes instead of days, freeing employees from data entry to focus on receivables.
- ShopifySHOP kept headcount flat while growing revenue by ~30%, after tying AI to performance reviews and requiring proof that new hires weren’t needed.
The oil wildcard: While companies are seeing productivity gains, there’s still concern about what comes next. CFOs warn that higher oil prices tied to Middle East tensions could squeeze consumer spending, with Shopify’s Jeff Hoffmeister noting that rising gas costs usually force cutbacks elsewhere. VantageScore CEO Silvio Tavares expects some near-term spending ahead of price hikes, but says prolonged disruption will push costs higher and risk a slowdown. For software companies already exposed to AI shifts, this scenario would only tighten the vise.