Software shares are struggling in 2025, and many analysts point to artificial intelligence as the reason. While tech firms have been racing to deliver AI-powered tools, those same tools are raising doubts about the future of the software industry itself.
Salesforce, once a reliable performer, has dropped 26% this year, making it one of the weakest stocks in the Dow. Adobe is down 19%, and Atlassian has fallen 30%. In contrast, the S&P 500 has gained 10% and the Nasdaq Composite is up 11%.
Key points driving the slump:
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AI tools that can write and develop code are challenging the value of traditional SaaS models.
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Investors fear the rise of “agentic AI,” which allows companies to build their own applications and reduce reliance on subscriptions.
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Analysts say the speed of the shift caught many software giants off guard.
“The volatility from this pivot to agentic AI is unlike anything I’ve seen,” said Ted Mortonson of Baird. “When your subscription base is under pressure, it becomes a real risk for SaaS companies.”
The idea that “AI is eating software” is gaining traction. Nvidia CEO Jensen Huang predicted this years ago, and recent market trends appear to support it. Even OpenAI’s Sam Altman suggested SaaS may be entering a “fast fashion” era, where applications are built and replaced at rapid speed.
Still, not everyone believes software is doomed. Analysts at Jefferies argue that fears are exaggerated, calling AI a wave of transformation rather than a complete replacement. Salesforce and Adobe, for example, are already rolling out AI-driven features to adapt.
Wall Street remains divided. Some say software firms misjudged the pace of AI adoption, while others believe the downturn is temporary and companies will find ways to blend AI with their subscription models. As analyst Ross Mayfield put it, “The AI landscape can change in months, not years. Anyone predicting the future of software today is working with a lot of assumptions.”
For now, software companies face one of their toughest tests: proving they can survive, and thrive, in an AI-driven market.
