Software stocks are under intense pressure as investors reassess the impact of rapidly advancing artificial intelligence on traditional business models. RELX reported a 9% rise in 2025 operating profit and reiterated that artificial intelligence would drive growth for “many years to come”, but its shares are down roughly 33% over the past month amid a broad technology sell off. The S&P North American Technology Software index dipped below 20x forward earnings last week for the first time on record, indicating investors are no longer willing to pay a premium for software-as-a-service companies. Analysts at Jefferies screened 64 software stocks and found that “42% are trading at, or close to, their historical low valuation”.
The sell off has hit United Kingdom names including Sage Group, whose shares have fallen around 27% over the past month, alongside declines at Softcat, Kainos Group and Bytes Technology. The so called “SaaS-pocalypse” is being driven by concern that agentic artificial intelligence will bypass or replicate software products and become existential for companies that fail to adapt. Artificial intelligence chatbots can now write code at a level close to that of experienced engineers, and Anthropic’s Claude products are already automating legal and coding tasks, which helped trigger the latest leg of the software rout. Other startups such as Databricks, Cognition and OpenAI are pushing agentic tools, and a recent rally in logistics stocks was reversed after a company claimed a new artificial intelligence tool was helping customers scale freight volumes by 300% to 400% without a corresponding increase in headcount.
Investor anxiety is amplified by the scale of funding pouring into new challengers. Anthropic raised $30bn in a Series G round at a $380bn valuation this week, more than doubling its previous valuation and underscoring the abundance of capital for private competitors. Bain & Co analysts found software firms are still holding on to over 90% of their existing clients year-on-year, but growth is slowing as customers pause spending while executives “figure out AI”. Author and artificial intelligence expert Azeem Azhar notes that, unlike the last automation wave 10-15 years ago when incumbents such as Charles Schwab ceded only limited share to robo advisers, the speed of artificial intelligence improvement has shrunk the window for incumbents to respond. Consultant David Lipman argues the market has overcorrected by dumping “rock-solid software businesses” that are already incorporating artificial intelligence, as most buyers prefer to get new features from trusted vendors. From 2020 through the first half of 2025, about one-in-five North American buyouts were tech deals, and the public-market wobble is now spreading to listed alternative asset managers as investors fear the value of private software portfolios is deteriorating. Lipman says private equity funds should seize the moment to help portfolio companies adapt to a new artificial intelligence era, while RELX’s leadership insists that long-run company performance, not short-term sentiment, will determine outcomes.
