Why AI Is Forcing Markets to Rethink Software Stocks
A global selloff is forcing investors to question whether artificial intelligence strengthens enterprise software moats or quietly dismantles them.
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A sharp global selloff in software stocks this week highlights a growing investor concern that artificial intelligence may weaken, rather than reinforce, the competitive moats that have long underpinned enterprise software valuations.
Asian IT stocks fell steeply on Wednesday, 4 February, after declines in US and European markets, with India’s Nifty IT index dropping 6.7%. Shares of Infosys Ltd and Tata Consultancy Services Ltd fell sharply, mirroring losses in US software leaders such as ServiceNow and Salesforce.
The immediate trigger was renewed attention on how fast AI tools are moving from experimental features to practical workflow replacements.
New AI-driven legal and collaboration tools launched by Anthropic’s Cowork platform underscored how quickly capabilities once embedded in high-margin enterprise software are becoming accessible through generative AI systems.
For decades, software firms were valued on the assumption that high switching costs, deep integrations, and subscription-based pricing created durable defenses.
AI challenges that logic in two ways: First, it automates tasks that previously justified premium pricing.
Second, it lowers barriers for new entrants to replicate functionality without replicating legacy architectures.
This tension was visible across markets. In the US, ServiceNow extended its year-to-date losses to nearly 30%, while Salesforce is down more than a quarter in 2026.
European software stocks followed, with Capgemini and RELX posting double-digit declines.
For Indian IT services firms, the concern is more nuanced. While large vendors benefit from scale, client relationships, and execution capability, investors are increasingly questioning how much of traditional application development, systems integration, and managed services can be automated by AI over time.
Analysts said the current repricing does not imply that AI will destroy software demand, but that it changes the basis on which growth and margins will be judged.
The market reaction suggests that investors are no longer willing to assume that AI automatically lifts all technology boats. Instead, they are asking which parts of the software stack gain leverage from AI, and which ones risk becoming interchangeable.
For software companies globally, the answer to that question may determine how durable their business models remain in an AI-first economy.
