The Re-Rating of Reality
A new narrative has taken hold on Wall Street, and it is brutal for anyone holding traditional software stocks. According to the Wall Street Journal, the software business isn’t dying, but its “growth story” is being violently rewritten.
For a decade, the formula was simple: Buy software stocks because they have infinite margins and endless growth. Now, JPMorgan analysts have slapped a new label on the sector: “Guilty until proven innocent.” The market has convinced itself that every seat-based software license (like Salesforce or Adobe) is just a future job loss waiting to happen. If AI replaces the worker, who pays for the software license the worker used?
The Palantir Exception
But while the sector bleeds, Palantir just posted a 70% revenue jump. This creates a fascinating split screen. On one side, you have “System of Record” companies (databases, CRMs) that are being punished because investors fear their data moats are leaking. On the other, you have “System of Intelligence” companies (like Palantir) that are being rewarded because they actually do the work.
The market is effectively saying: “We don’t want tools that help humans work faster; we want tools that replace the human entirely.”
The “Agentic” Cliff
The fear isn’t just about efficiency; it’s about the “Agentic” future. As AI agents like Anthropic’s latest tools begin to automate complex workflows (coding, data entry), the traditional SaaS pricing model - charging per user per month - looks dangerously obsolete.
We are watching the painful transition from “Rent-a-Tool” to “Rent-a-Result.” The software companies that survive won’t be the ones selling subscriptions; they will be the ones charging a “success fee” for doing the job. The growth story isn’t dead, but the “easy money” chapter is definitely closed.