Software Investors Dump Shares as AI Disruption Fears Mount

A fresh wave of selling hit US software and private capital stocks this week as investors grapple with mounting evidence that artificial intelligence is fundamentally reshaping—and potentially threatening—the enterprise software business model that has minted billions in market value over the past decade.

The selloff comes as Franklin Templeton's CEO warned that AI poses an existential threat to traditional enterprise software companies, a stark assessment that appears to be crystallizing broader market anxieties about which software businesses will survive the AI transition and which will become obsolete. For CFOs who've spent years building tech stacks around legacy SaaS platforms, the market's message is blunt: the ground is shifting faster than anyone expected.

Here's the thing everyone's missing in the "AI will disrupt everything" narrative: it's not that AI is coming for software companies in some distant future—it's that investors are right now trying to figure out which software vendors are building on sand. (And they're not waiting around to find out the hard way.)

The parallel selloff in private capital shares adds another wrinkle. Private equity and venture capital firms have been among the most aggressive buyers of software companies over the past five years, often paying premium multiples based on predictable SaaS revenue models. If those revenue models are about to get disrupted—if AI can automate away the need for entire categories of software, or if new AI-native competitors can undercut incumbents on price—then the private capital firms holding those assets have a problem. And when private capital has a problem, their public shareholders have a problem.

Franklin Templeton's CEO didn't mince words about the threat. The concern isn't just that AI will create new competitors (though it will). It's that AI might eliminate entire categories of software spending. Why pay for a complex workflow automation tool when an AI agent can just... do the workflow? Why maintain a massive CRM system when AI can extract insights from unstructured data without forcing your sales team to log every call?

This is where it gets interesting for finance leaders. The software you're budgeting for in 2026 might not be the software you need in 2027. But the contracts you signed? Those are probably multi-year commitments with auto-renewal clauses. (Ask me how I know from reviewing approximately one million SaaS agreements in my M&A days.)

The market's trying to price this uncertainty, and it's not going well. Software stocks have historically traded on the promise of predictable, recurring revenue—the famous "SaaS multiple" that justified sky-high valuations. But if AI introduces genuine uncertainty about whether customers will renew those contracts, or whether they'll need the software at all, then the entire valuation framework breaks down.

What makes this particularly thorny is that it's not a simple story of "AI good, old software bad." Some incumbent software companies are racing to build AI capabilities. Others are getting disrupted by AI-native startups. And still others might discover that their core product becomes more valuable in an AI world, not less. The problem is that investors—and CFOs—have to make bets now, before anyone really knows which category any given vendor falls into.

The question finance leaders should be asking: which of your software vendors are treating AI as a feature, and which are rebuilding their entire product around it? Because the market's increasingly convinced that distinction matters. A lot.