AI in Software Industry

As AI's transformative power grows, its disruptive potential on the software industry becomes undeniable. Fears over AI-created competition and diminished software moats have triggered turbulence in the market, sending software stock valuations plummeting. Between July 2025 and April 2026, software stocks declined approximately 35%, reflecting the market's skepticism about incumbent players' ability to adapt to these conditions.

Despite concerns, leading industry players like Microsoft, Guidewire, and Tyler remain resilient, retaining wide-moat ratings and demonstrating strong adaptability. These companies’ are able to leverage AI as a growth accelerant while maintaining dominance within niche domains, such as the public sector or enterprise-specific solutions.

What are the key considerations when evaluating the impact of AI on software valuations? 

Contrary to market fears, our research shows artificial intelligence (AI) will complement, not eliminate, traditional software.  Software stocks have faced significant challenges, with declines of approximately 35% since mid-2025. Despite concerns, leading industry players like Microsoft, Guidewire, and Tyler remain robust, retaining wide-moat ratings and demonstrating strong adaptability. These companies are able to leverage AI as a growth accelerant while maintaining dominance within niche domains, such as the public sector or enterprise-specific solutions.

Download the report to identify more trends and further insights on how companies are positioned to thrive in the artificial intelligence era.