“Software is eating the world,” wrote Marc Andreessen in an article originally published in The Wall Street Journal in 2011.1 For 20-plus years, he was basically spot on. Software companies became dominant; the business models seemed impregnable, multiples expanded and the companies grew like weeds. Fast forward to 2026; a recent Business Insider article quoted Marc Andreessen’s declaration and added that “Today, AI is beginning to devour software. Instead of helping the industry improve, new AI tools and agents could end up replacing some software products entirely.”2
What a 180! And the market seems to be a believer in this new narrative. For example, I was surprised to learn that, due to the recent drop in the stock price in January and February 2026, Microsoft, the most exposed to software of the Magnificent 7, has actually underperformed the S&P 500 Index since the introduction of ChatGPT in November of 2022. Many dominant software companies now trade at steep discounts to market multiples, including Adobe, Salesforce and Intuit. These three were all at 30x price-to-earnings or better at the end of 2023, i.e., steep premiums to the market multiple. They are currently in the mid/low-teens multiples, i.e., about half what they once were.
But hold on. “AI changes what we build and who builds it, but not how much needs to be built. We need vastly more software, not less,” wrote Steven Sinofsky in a recent blog post. Further, he continued, “Wall Street is filled with investors of all types. There’s also a community, and they tend to run in herds. The past couple of weeks have definitely seen the herd collectively conclude that somehow software is dead. That the idea of a software pure play will just vanish into some language model. Nonsense.”3
Do we know what the future holds? Nope. Perhaps AI does eat software, and software earnings get crushed, making those current “cheap” P/E multiples irrelevant. But maybe those software companies adapt and use AI to their advantage somehow and get back in the saddle. Both scenarios seem possible.
How do we navigate this market? Diversification: We do not over-allocate to any one company or sector. Diversification is a great risk management tool that helps to improve the resiliency of portfolios, making them better positioned to adapt as conditions continue to evolve.
1 Read More: https://www.wsj.com/articles/SB10001424053111903480904576512250915629460
2 Read More: https://www.businessinsider.com/software-ate-world-now-ai-eating-software-saas-anthropic-2026-2/
3 Read More: https://www.a16z.news/p/death-of-software-nah