A co-founder of Thoma Bravo, a major US private equity firm focused on software and technology, stated on Tuesday that artificial intelligence will disrupt software companies more rapidly than anticipated, and significant, irreversible valuation cuts for some of these firms are "entirely reasonable." Speaking at the Thoma Bravo investor conference in Miami, Orlando Bravo commented, "There are many, many software companies in the public markets that will be completely disrupted by cutting-edge AI technology. These software companies will be disrupted by AI no matter what." Bravo did not specify which software companies he believes warrant substantial devaluation or which face existential risks from disruption.

Thoma Bravo, established in 2008, is an investment giant specializing in the software sector. As of December 2025, the firm manages assets exceeding $183 billion, invested across 77 companies. Within global software investing and technology mergers and acquisitions circles, Thoma Bravo is considered a top-tier player, particularly renowned in the niche of software and technology private equity. The firm is a prominent name, especially in discussions concerning enterprise software, cybersecurity, and the privatization of SaaS companies.

The narrative of "AI disruption" has swept through global stock markets, particularly battering software stocks. Recent heavyweight releases of AI agent products focused on efficient, agentic workflows from leaders like Anthropic and OpenAI, which could potentially replace certain functional software services at a much lower cost, have triggered heavy selling pressure on software equities globally. The iShares Expanded Tech-Software Sector ETF, which tracks the US software industry, has fallen approximately 28% from its September peak, plunging deeply into bear market territory.

The pessimistic "AI disruption" theme that emerged in February stems from growing market concerns that viral AI agent workflows, like Claude Cowork and OpenClaw, could undermine entire software empires built on SaaS seat-based subscription revenue models. This selling rapidly spread to insurance, real estate, trucking, and other industries perceived as reliant on seat-based revenue or labor-intensive business models—sectors the market believes will be fundamentally disrupted by AI.

Not only in US markets but globally, software sectors have continued to decline sharply since February amid the "AI disruption" panic. Despite a surge in stock buybacks within the US software sector, investors remain unconvinced, as the core concern is the potential long-term reshaping of fundamentals and business models by AI agents like Claude Cowork and OpenClaw. The "Anthropic storm" impacting software stocks continues to reverberate globally, with selling accelerating and spreading to wealth advisory, management, real estate consulting, and other traditional industries seen as vulnerable to AI disruption.

The market's pessimistic "AI disruption" expectation has impacted various sector blocks like dominoes, with software, SaaS, private equity, insurance, traditional investment banking, wealth management, real estate, property management, and even logistics experiencing "rotating sharp declines." Over the past three to four weeks, AI has seemingly swept through traditional sectors one by one, prompting investors to rapidly offload potential "losers." As batches of innovative AI agents focused on agentic workflows are launched, they threaten to disrupt one traditional industry after another, suppressing pricing power across the broader economy.

Since the start of the year, fears that the "AI super-wave could compress corporate profits, disrupt employment, and bring deflationary impacts" have quickly spilled over into multiple traditional economic sectors, including software, private credit, real estate services, and insurance. The core driver behind this round of software stock plunges and rotating sector sell-offs is fundamentally the pessimistic "AI disruption" thesis. This narrative has dominated global financial markets since February, gaining strong traction particularly after Anthropic's release of a series of AI tools and agent collaboration platforms, which ignited a broad-based selling wave across SaaS subscription software and the broader software equity market.

The "Anthropic storm," which alarmed global software investors, technically began in early February when Anthropic released a significant legal plugin for its rapidly popular Claude Cowork agent. This super-tool, enabling full AI automation for contract review with a very low technical barrier, wiped billions of dollars in market value from companies like Thomson Reuters and RELX, the parent company of LexisNexis.

However, Bravo noted that some software companies' share prices have experienced "unwarranted" severe selling during this downturn. The seasoned asset manager emphasized that these are "phenomenal large software platforms that will actually emerge as major winners in the AI agent era." "These companies have been punished severely, and they shouldn't have been," he added, without naming the specific public software companies.

Recently, John Zito, President of alternative asset management giant Apollo Global Management, criticized private equity firms for their "arrogance" regarding software valuations. Zito specifically referenced Bravo's significant $6.4 billion acquisition of the software company Medallia in 2021. In response, Bravo acknowledged that during the acquisition, Thoma Bravo overestimated Medallia's growth rate. "We made a mistake, and that caused us to pay too high a price," Bravo stated.

In recent months, global credit markets have faced severe selling pressure and asset redemption challenges as investors actively assess how AI will disrupt the revenue streams of SaaS providers and software companies broadly. Over the past decade, alternative asset management giants, including Blue Owl, heavily entered the software sector, attracted by its predictable earnings trajectory and higher profit margins.

With Morgan Stanley raising its direct lending default rate forecast to 8%, and UBS previously projecting that AI disruptions would become more apparent in lower-quality, refinancing-needy credit assets around 2026-2027, default rates for private credit with characteristics like "high software sector exposure, high leverage, and significant refinancing pressure" could rise notably soon. In other words, if the "AI disruption" pessimism continues to dominate risk pricing, the default rate trend remains upward, but it appears more like a "structural rise in sectors like software vulnerable to AI disruption" rather than a "total loss of control across the entire private credit market."

The real impact of advanced AI technology is not on all software companies, but rather on those whose product functionalities are easily subsumed by native model capabilities, have weak moats, involve heavy customization, and whose customers can partially rebuild functionalities using AI themselves. For these borrowers, the issue isn't the valuation decline itself, but the growing doubt surrounding the sustainability of profit growth, pricing power, and renewal capabilities. Once growth assumptions are revised downward, credit structures built on high EBITDA multiples and high leverage can rapidly become fragile.

A Fitch Solutions study also clearly indicated that the most vulnerable software companies are often those with heavy fixed implementation, significant customization, and products where functionalities can be partially replaced by in-house AI development. Consequently, private credit default rates are likely to continue rising, with increases highly concentrated in software direct lending and other areas where AI directly compresses business models. The combination of "AI disruption" turbulence, low credit ratings, and the maturity wall is particularly perilous.