Shares of major software firms dropped sharply as investor concerns over AI’s impact on the sector increased this week.

Monday.com saw its shares fall 30%, while SAP, Europe’s biggest company by market value, dropped as much as 7.1% in Frankfurt, erasing nearly €22 billion (US$26 billion) at its lowest point.

Other software firms, including Sage Group and Dassault Systemes, also saw declines, following losses for US-based peers such as Salesforce and Workday.

Some analysts cited the selloff to fears that AI could enable faster and cheaper software development, intensifying competition for existing providers.

Salesforce shares have fallen over 30% this year, Adobe about 25%, and Gartner cut its full-year outlook, citing tariffs, budget cuts, and AI-related competition.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Software disruption follows predictable 50-60 year technology cycles

The current AI fears mirror historical patterns of technological disruption that occur in predictable waves.

Research spanning 250 years of capitalism shows major disruptions happen every 50-60 years, from Canal Mania in the 1790s to Rail Mania in the 1840s, each following similar patterns of massive investment, bubble formation, and eventual transformation of entire industries1.

The computer and internet revolution began in 1971 with microprocessors, making the current AI disruption part of this established cycle rather than an unprecedented event1.

Each historical cycle saw established industries initially resist new technologies before being fundamentally restructured. For example, railways didn’t eliminate transportation but transformed how it operated, which could be similar to how AI may reshape rather than eliminate software companies.

2️⃣ AI adoption in enterprise software is already generating measurable business value

The shift from traditional software-as-a-service to AI-powered solutions is happening faster than many market observers expected.

The AI market in finance alone was valued at $9.45 billion in 2021, with 70% of financial institutions already using AI for fraud detection2.

Major institutions like JP Morgan and Mastercard are leading implementation, demonstrating that AI integration is moving beyond experimental phases into core business operations2.