software Sector Under Pressure as AI Threatens Dominance, Palantir Remains Key Indicator
NEW YORK - A leading U.S. software exchange-traded fund (ETF),the IGV,is experiencing outflows despite holding major tech players like Palantir,Microsoft,Oracle,and Adobe,signaling growing investor concern that artificial intelligence is disrupting the software industry. The ETF, with Palantir representing its largest holding at 9.8%, has yielded only 7.19% this year, lagging behind the S&P 500 (9.88%) and Nasdaq (11.5%) indices.
The underperformance stems from declines in key IGV components like ServiceNow (-12.8%), Adobe (-20.98%), and salesforce (-22.44%). While Palantir (up 106.01%) and Microsoft (up 20.73%) have boosted the ETF’s overall performance, even Palantir has recently experienced a 3.59% dip, indicating a broader weakening in software stock momentum.
Analysts attribute the shift to waning investor optimism surrounding AI-driven software, with funds flowing out of companies perceived as lacking a strong competitive edge. Some on Wall Street are suggesting AI is now “swallowing software,” echoing a 2011 observation by developer Mark Andreesen that ”software is eating the world.”
Adobe and Salesforce are specifically cited as vulnerable. Adobe’s Photoshop faces competition from AI image generation services, while Salesforce’s core business model is potentially threatened by AI’s ability to streamline business processes.
“The recent software industry has been undergoing tremendous pressure to be encroached on AI startups,” the article states. Experts recommend focusing on software companies with critically important competitive advantages, such as Microsoft’s economies of scale and Palantir’s unique platform, as likely long-term winners.
KB Securities researcher Yoo Joong-ho suggests there remains potential for stock price growth driven by AI momentum and market demand.
