Investor concerns about the disruptive potential of artificial intelligence (AI) continue to intensify, leading to another wave of heavy selling in software stocks this week, following a brief rebound last Friday. Byron Deeter, a partner at the prominent Wall Street investment firm Bessemer Venture Partners, believes the severe volatility currently rocking global software equities, particularly U.S. software stocks, presents a rare "buy-the-dip" opportunity for investors. He declared that the software and SaaS sectors are "absolutely in a state of severe overselling." Despite this week's sharp decline, Deeter maintains that the market chaos is creating favorable profit-making conditions for savvy investors.
In a media interview on Thursday, Deeter compared the current potential V-shaped trajectory to similar rebound patterns observed during the COVID-19 pandemic and the global financial crisis. However, he cautioned that this recovery will be fundamentally different, predicting "significant divergence" among software companies based on their varying growth prospects and fundamental outlooks, rather than a uniform, market-wide bounce from the bottom.
Deeter stated that investor sentiment towards software companies has shifted to skepticism, treating them as "guilty until proven innocent." He emphasized that the stock market is currently in a "show me the money" mode, where investors are growing increasingly weary of software companies' ambitious pivots to "AI+software" and promises of massive AI-related expenditures. Consequently, they are demanding clear profitability and accelerated revenue growth before following the lead of tech giants like Amazon in committing substantial capital.
Deeter drew a clear distinction between companies facing horizontal attack vectors and large software firms with defensible business models. He suggested that companies focused on specific functions and tools, such as Asana (ASAN.US), DocuSign (DOCU.US), and Adobe (ADBE.US), are more vulnerable to complete disruption by agentic AI. In contrast, he pointed out that "systems of record" and vertical industry companies like Shopify (SHOP.US) and ServiceTitan (TTAN.US) are in a better, more advantageous position due to deep payment integrations and specialized market positioning. Platform software giants like Microsoft and SAP, which focus on "AI+core operational processes" and possess strong fundamentals, are situated most favorably.
Deeter identified consumer-facing marketplace platforms as another resilient category. He indicated that companies like Airbnb (ABNB.US) and StubHub (STUB.US), which aggregate market demand to build moats, will likely be shielded from severe AI disruption, as AI agents are "somewhat irrelevant" to their core business characteristics.
Looking ahead, Deeter believes the next strong wave of growth related to the software industry will emerge from the private markets. Software companies poised to significantly benefit from AI-driven performance acceleration—such as Databricks, ClickHouse, and Canva—are potential candidates for major IPOs. He described this trend as part of an emerging "software renaissance" that will gradually manifest in public IPO markets over the coming years.
Amid the heavy selling of software stocks, a growth narrative centered on "AI reshaping software profitability" is quietly gaining traction. For global software investors, AI application leader Applovin (APP.US), focused on "AI+digital advertising," has responded forcefully to short-sellers with robust performance, effectively demonstrating that the "Software-mageddon" rhetoric fueled by the agentic AI trend initiated by Anthropic is an over-amplification of panic. This suggests the market has broadly misjudged platform software giants with strong fundamentals focused on "AI+core operational processes" during this super sell-off.
While AI agents focused on agentic workflows indeed pose a valuation threat to "automate-able white-collar tasks" (leading to systematic de-rating of functional SaaS software), for large platform software giants controlling core operational processes like "data flow/content distribution/transaction execution," AI acts more as a demand accelerator. Agentic AI may compress the moats of "shallow functional tools," but it conversely increases the value density of platforms possessing deep data assets, closed-loop operational processes, billing/payment and compliance controls, and stable, agent-callable APIs.
The "Software-mageddon" narrative sweeping global equity markets has recently intensified. A series of AI tools/agentic AI collaboration platforms launched by Anthropic, often termed an "OpenAI rival," triggered a broad selling wave across SaaS subscription software and the wider software sector. Influenced by these serious concerns, the S&P 500 Software & Services Index has fallen approximately 13% since late January, erasing nearly $1 trillion in market value by the end of last week.
This week, AI disruption fears have impacted various sectors like dominoes, with sequential significant declines in software, SaaS, private equity, insurance, property management, and even logistics. AI has seemingly swept through industries one by one over the past week or two, prompting investors to accelerate selling of potential "losers."
This "panic-style" sell-off in software stocks essentially represents the market discounting the potential of AI agents into valuations all at once: as AI startups like Anthropic launch more capable workflow agents and demonstrate "end-to-end automation" in scenarios like legal or sales, investors quickly worry that traditional subscription software could be replaced by "one agent + a few AI tools," leading to a somewhat indiscriminate valuation re-pricing.
Bessemer's Byron Deeter defines this as "absolutely oversold" but simultaneously emphasizes that the future rebound will not be uniform; significant divergence will emerge. Consequently, the market is gradually pricing in a different AI growth narrative for software companies: when AI significantly enhances optimization efficiency and reduces marginal decision-making costs, platform software companies like Microsoft, Oracle, ServiceNow, and SAP might experience a positive feedback loop of "increased throughput + stronger unit economics," rather than being completely replaced.
If a software company can transform the agent wave into incremental gains—by treating agents as new entry points, creating billable usage/automation quotas, or embedding the efficiency gains from agents into higher retention and stronger expansion—while its business features high switching costs, strong compliance constraints, and deep integration into core processes, then oversold conditions often create better risk-reward opportunities. Conversely, if a product primarily consists of standalone functions that could be "horizontally replaced" by general-purpose agents, and its business model heavily relies on seat counts without being tightly bound to business data/process loops, the current downturn might signal the "beginning of a valuation normalization" rather than a one-time mispricing.
Investment firms like Bessemer Venture Partners already view this sell-off as an overreaction and are leaning towards making structural investments in leading companies with platform capabilities.