The stock market has always mirrored society’s changing priorities, and right now, software shares are in the doldrums. The irony is hard to miss tech companies are responsible for giving the world artificial intelligence, yet the very rise of AI tools is clouding the future of the traditional software industry.
Investors, analysts, and entrepreneurs are beginning to voice growing concerns that the AI wave may disrupt the established order, especially for companies whose bread and butter model has been software as a service (SaaS).
In this article, we’ll explore why software stocks are struggling, how AI is disrupting SaaS, what investors and industry leaders are saying, and real world case studies that highlight this ongoing transformation.
The Changing Landscape How AI Is Reshaping the Software Industry
For decades, SaaS has been the golden child of the tech sector. Businesses and consumers alike subscribed to services that helped them manage projects, communicate, analyze data, or run operations more efficiently.
Companies like Salesforce, Zoom, Atlassian, and ServiceNow flourished because they provided consistent, subscription based solutions. But the arrival of generative AI has introduced a new dynamic.
Tools like ChatGPT, GitHub Copilot, and Google’s Gemini are demonstrating capabilities that can perform and in many cases automate tasks previously done by traditional software.
For instance, AI can write code automatically, challenging companies that built their business on developer focused SaaS. AI powered customer service bots reduce reliance on CRM platforms that once held a near monopoly on client engagement.
AI driven productivity apps integrate tasks like scheduling, project management, and document generation into a single interface, bypassing multiple SaaS subscriptions.
This rapid shift explains why software shares are in the doldrums. Investors worry that traditional SaaS firms might see declining demand as customers opt for more flexible, AI driven solutions.
What Analysts Are Saying
Industry experts argue that AI is not just another incremental technology like cloud or mobile; it represents a foundational shift.
Dan Ives, a Wall Street tech analyst, recently noted that AI has the potential to be both the biggest opportunity and the sharpest disruptor. SaaS companies that fail to embed AI into their offerings risk losing market share rapidly.
Cathy Wood of ARK Invest has expressed optimism about AI overall but warned that legacy SaaS players may be in danger of being commoditized as AI native startups emerge.
Gartner’s 2025 Technology Report forecasts that by 2027, over 40% of SaaS tools will integrate AI as their primary value driver, not their traditional features.
The consensus is clear: the sector is facing unprecedented disruption, and this is why software shares are in the doldrums.
GitHub Copilot vs. Developer Tools
One of the most striking examples of AI disruption is GitHub Copilot, an AI-powered coding assistant developed by GitHub and OpenAI. Before AI, developers relied on SaaS products like Atlassian’s Jira or even specialized IDE plug ins to streamline their coding tasks.
Now, Copilot can suggest, debug, and even generate entire blocks of code in real time. Developer teams that once purchased multiple SaaS licenses for productivity, documentation, and bug tracking are now consolidating their needs into AI first platforms.
Atlassian’s shares fell nearly 30% in 2024 as investors grew concerned about AI’s ability to replace or minimize reliance on its tools. This case shows how AI can directly cut into revenue streams that once looked untouchable.
Zoom exploded during the pandemic, becoming a household name. But the AI era is rewriting its story. Tools like Otter.ai, Fireflies, and Microsoft Teams’ AI Copilot now handle transcription, note taking, meeting summaries, and task assignment.
A marketing executive I spoke with described her team’s shift, We used to pay for Zoom plus two or three SaaS tools for productivity and meeting follow ups. Now, with AI meeting assistants integrated into Teams, we’ve cut our software stack in half.”
The practical reality is that SaaS providers face shrinking usage footprints as AI consolidates multiple functions into fewer apps.
Investor Sentiment Why Software Shares Are in the Doldrums
Investors are not just worried about current revenue streams they’re anxious about future business models. Traditional SaaS relied on predictable recurring revenue. But with AI, Consolidation of tools means fewer subscriptions. Freemium AI models undercut pricing.
AI native startups are scaling faster, threatening incumbents. As a result, software ETFs and SaaS-heavy portfolios underperformed the Nasdaq by nearly 15% over the past year. This underlines why software shares are in the doldrums today.
From a personal standpoint, I’ve experienced this disruption firsthand. As a small business owner, I once relied on multiple SaaS platforms Trello for project management, Grammarly for editing, and HubSpot for CRM.
When I integrated AI tools like Notion AI and ChatGPT into my workflow, the difference was stark. Not only did I save costs by reducing redundant SaaS subscriptions, but I also noticed efficiency improvements.
For me, it wasn’t about rejecting SaaS, but about realizing AI could deliver more value in one place. Multiply that decision across thousands of small businesses, and you begin to see the ripple effect in corporate earnings reports.
Will SaaS Adapt or Decline?
Despite the challenges, not all is bleak. Some SaaS companies are adapting quickly, Salesforce has invested heavily in Einstein GPT, embedding AI deeply into its CRM platform.
Adobe has launched Firefly, integrating generative AI across Photoshop and Illustrator. ServiceNow has introduced AI workflows for IT management.
The companies that succeed will be those that embrace AI as a core product feature, not just an add on.
Looking at history, disruptive technologies often cause turbulence before stabilizing into new growth opportunities. The dot com boom, the rise of mobile apps, and the shift to cloud computing all triggered similar uncertainty.
The difference with AI is speed. What used to take decades is now happening in just a few years. SaaS firms that can pivot quickly may still thrive, but those stuck in legacy models risk obsolescence.
Investors, meanwhile, are recalibrating. Some are rotating funds out of traditional SaaS and into AI first firms, while others are betting that incumbents like Microsoft, Google, and Adobe will reinvent themselves successfully.
Why Software Shares Are in the Doldrums
The current slump in software stocks is more than just a market fluctuation it’s a reflection of a deep, structural shift. Software shares are in the doldrums because AI is rewriting the rules of the game.
Case studies like GitHub Copilot and Zoom demonstrate the disruptive force at play, while expert opinions underline the risks and opportunities ahead.
Personal experiences and small business stories bring this closer to home, showing how decisions made by millions of users compound into major financial impacts.
In the end, AI is not killing software; it’s reshaping it. The companies that adapt will survive and possibly thrive while those that don’t may become footnotes in the history of technology.