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The emergence of agent-based artificial intelligence (AI) could disrupt some companies in the software industry, but it could also create significant opportunities for many companies, according to a report from Goldman Sachs.
The report suggests that while AI raises concerns about the future of software, it is expected to expand the overall market and investors should adopt a selective approach as the technology evolves.
“Although AI has the potential to be disruptive to some companies, it also has the potential to benefit many companies, reinforcing the idea that investors should be selective as AI technologies continue to evolve,” the report said.
Citing the opinions of some experts, the report paints a picture in which software has dominated the industry for more than a decade, but the rise of new agent AI tools for software development has raised concerns that AI will “eat” software, leading to a rapid reassessment of the field.
But Gabriela Borges, a Goldman Sachs US software analyst, said that “AI is software,” essentially code designed to perform a task. She predicts that AI will not only expand the software market, but also increase competition by lowering the cost of coding.
The key risk for legacy software companies, the report said, is that AI-native companies may seize new growth opportunities while incumbents may continue to shrink their traditional roles.
However, Borges added that legacy companies “innovate as fast followers” and while they need to prove their capabilities, they could still leverage their domain expertise to remain competitive.
Rick Sherlund, founder and CEO of Sherlund Partners, said AI will not replace software, but rather transform it.
He described the current stage as similar to past technological changes, adding that software is being “reborn around AI” and will require fundamental restructuring using large-scale language models (LLMs) and AI agents.
Sanjay Poonen, CEO and president of Cohesity, also described AI as a transformative force and warned that businesses need to adapt quickly.
“Like any other technology wave, we have to survive this tsunami or we will be destroyed,” he said.
The report added that stabilization in this area may take time. Ben Snyder, chief U.S. equity strategist at Goldman Sachs, said stocks in industries facing structural turmoil tend to stabilize only when earnings stabilize.
The report also noted continued pressure in credit markets related to software exposure, although risks remain manageable in a stable macro environment.
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The report therefore outlined that investors should avoid a binary view of the sector and focus on companies that can adapt, particularly those that invest in AI-driven restructuring and strong technological capabilities.
“This is not an environment where you make binary bets on whether software will survive or perish; this is an environment that demands selectivity.”
