By : Mohamed ELKholy

The software selloff is investors’ real-time repricing of the sector in the AI age, asserts the CEO of one of the world’s largest independent financial advisory organizations.

The stark analysis from Nigel Green of deVere Group comes as a new AI automation tool from Anthropic sparked a $285 billion plunge in big-name stocks across the software sector.

He says: “The selloff is not about fear of AI — it’s about what software businesses can realistically charge in an AI-first world.

“When AI agents can perform legal review, data analysis, research and compliance instantly, subscription-heavy models lose pricing leverage.

“Investors are reassessing whether decades-old assumptions around recurring revenues still hold.

“The sharp falls in software stocks reflect a market recognizing that margins, not innovation, are now the battleground.”

The scale and speed of the declines underline how abruptly investor thinking has shifted.

Software companies long valued for predictable subscription income, entrenched workflows and information advantages are now being judged against a different standard: how defensible those revenues remain when AI can replicate outputs faster, cheaper and with minimal friction.

Markets are increasingly questioning whether software businesses built around information resale, process automation or labour substitution retain meaningful scarcity value.

Tasks that once justified premium pricing and long-term contracts are being compressed by AI systems that can deliver comparable results in seconds.

As a result, the traditional logic underpinning software valuations is coming under sustained pressure.

Nigel Green notes that this represents a fundamental change in how investors assess technology risk. The assumption that digital products naturally enjoy durable pricing power is being challenged as automation strips complexity out of workflows.

“It is a valuation reset driven by economics. AI forces investors to examine what customers are actually paying for, and whether those services remain differentiated when intelligent systems become widely available.”

He continues: “Markets are drawing a clear distinction between companies that genuinely control AI economics and those that simply integrate AI to protect existing businesses.

“The former can potentially expand margins, while the latter risk seeing cost savings passed directly to clients.

“Markets are, it seems, penalizing firms that rely on legacy platforms, high headcount or process-heavy models that can be bypassed entirely.”

Another factor weighing on valuations is the rapid erosion of switching costs. As AI systems improve, the friction that once locked customers into long-term software contracts weakens.

Outputs become more standardised, competition intensifies and customer loyalty becomes harder to monetize.

Nigel Greens adds that the selloff reflects a growing recognition that “AI compresses value chains and concentrates returns.” A small number of firms, he explains, will “capture disproportionate gains, while a far larger group will struggle to defend pricing power.”

He concludes: “AI removes the insulation that once protected software margins.

“What looked like stable, recurring revenue is increasingly exposed.

“Investors aren’t waiting for earnings warnings or guidance cues. They’re repricing now, because AI accelerates disruption faster than quarterly results can capture.”