What If Everyone Is Wrong About Software?
The Most Misread Narrative in Markets Right Now
If AI is going to replace software, why hasn’t it done it already?
That is not a rhetorical question. It is one of the most important questions in markets right now, and the answer is worth a lot of money to the people who get it right.
The prevailing narrative says AI kills software. That foundation models replace enterprise platforms, vibe-coding startups displace incumbents and the world’s largest companies rebuild their operational infrastructure from scratch and legacy software vendors slowly get left behind. I have spent the last few weeks going deep on this theme and I have come away thinking the market may have it backwards.
I think that narrative is wrong because what I am seeing is not AI replacing software. It is AI being absorbed by it.
And if that is right, the winners of the next phase are not who the market currently thinks they are.
The full thesis, the basket architecture, and all fifteen names are below.
Let’s be honest about the backdrop first.
Software has been ripped apart this year. IGV is down more than 20% year to date, and the median software stock is more than 40% below its 52-week high. Sector valuations have compressed to roughly 40% below their 5yr average on forward sales, while free cash flow multiples are more than 75% off the peak. The broader tape is not exactly offering comfort either. As I write this, the S&P is sitting on key support with the moving averages starting to roll over. There is a very real chance this gets worse before it gets better.
I am launching Phase 3 into that weakness deliberately.
This is not a trade for the next three weeks. It is a multi-year position being built at a point of maximum dislocation between sentiment and reality. If the market deteriorates further, the basket will feel pain in the short term. That is the cost of the entry point and I want to be upfront about it.
The question that really matters is whether the thesis is right.