Software stocks play the "oversold" movement! Panic selling breeds buying opportunities at low levels, but differentiation will become more evident.

Investors' concerns about the disruptive potential of artificial intelligence (AI) continue to escalate, leading to a massive sell-off of software stocks this week following a bottoming out and rebound last Friday. Byron Deeter, a partner at the well-known Wall Street investment firm Bessemer Venture Partners, believes that the sharp sell-off experienced by global software stocks, especially U.S. software stocks, has presented investors with a rare "buying opportunity" and claims that the software and SaaS-related sectors are "definitely in a severe oversold state". Despite another sharp decline this week, Deeter still believes that the market turmoil is creating favorable conditions for savvy investors to profit. In a media interview on Thursday, Deeter compared the current potential V-shaped trajectory with similar rebound patterns seen during the COVID-19 pandemic and global financial crisis. However, he cautioned that this recovery will be fundamentally different and predicted that there will be "significant differentiation" among software companies with different growth prospects and fundamental expectations, rather than a uniform market-wide bottoming out and rebound. Deeter stated that investors have shifted their attitude towards software companies, viewing them as "guilty until proven innocent". He also emphasized that the stock market is currently in a "show me the money" mode, with investors growing increasingly tired of the ambitions of software companies to transition to "AI+ software" and the commitments to significant AI-related expenditures. Therefore, before tech giants like Amazon.com, Inc. continue to invest substantial sums, investors are demanding clear profit results and accelerated revenue growth. Deeter made a clear distinction between companies facing horizontal attack vectors and large software companies with defensible business models. He believes that focused and specialized software companies like Asana (ASAN.US), DocuSign (DOCU.US), and Adobe (ADBE.US) are more vulnerable to total disruption by agent-based AI intelligence, while companies focused on "systems of record" like Shopify (SHOP.US) and ServiceTitan (TTAN.US) are better positioned due to deep payment integration and specialized market positioning. Major platform software giants like Microsoft Corporation and SAP, focusing on "AI+ core operational processes" with strong fundamentals, are considered to be in the best position. Deeter believes that the next wave of strong growth in the software industry will come from the private markets, with software companies that stand to benefit significantly from AI-driven performance acceleration, such as Databricks, ClickHouse, and Canva, emerging as potential large IPO candidates. He describes this trend as part of an emerging "software renaissance" that will gradually manifest in IPO public market trading in the coming years. Amid the massive sell-off of software stocks, the narrative of "AI reshaping software profitability" is quietly spreading For global software stock investors, the AI leader focusing on "AI+digital advertising" Applovin (APP.US) is responding to short-selling forces with strong performance, and convincingly proving that the "software stock doomsday" market rhetoric sparked by the wave of agent-based AI intelligence curated by Anthropic is greatly exaggerating panic and the market is completely misjudging the platform software giants that focus on "AI+ core operational processes" with strong fundamentals. The agent-based AI intelligence focused on workflow automation does pose a valuation challenge for "automatable white-collar tasks" (hence the functional SaaS software sector being chopped by the market system), but for large platform software giants that control core operational processes such as data flow/content distribution/trade execution, AI functions more as an accelerator. While agent-based AI intelligence may squeeze the moat of "shallow functional tools", it also raises the value density of deep data assets, operationally closed-looped large platforms, billing/payment and regulatory controls, and API faces that can be consistently called by agents. The recent "software stock doomsday" that has swept across global stock markets has reached a fever pitch, with the release of a series of AI tools/agent-based AI intelligence collaboration platforms by Anthropic, the "OpenAI rival", triggering a broad sell-off wave in the SaaS subscription software sector and the overall software sector in the stock market. Influenced by this severe anxiety, the S&P 500 Software and Services Index has fallen by around 13% since late January, wiping out nearly $1 trillion in market value in the week leading up to last Thursday. This week, AI disruption expectations have swept across various industry sectors like software, SaaS, PE, insurance, property management, and even logistics, with each sector experiencing significant declines. AI has been sweeping through one industry after another in the past one or two weeks, as investors accelerate the selling of potential "losers". This round of "panic-driven" sell-off of software stocks essentially discounts the market's imagination of AI agency into valuations all at once: when AI startups like Anthropic introduce stronger workflow agents and demonstrate "end-to-end automation" capabilities in legal/sales scenarios, investors quickly worry that traditional subscription software will be replaced by "one agent + a few AI tools", thus resulting in a hasty revaluation. Byron Deeter of Bessemer defines this as "absolute oversold", but also emphasizes that the future will not see a uniform rebound, but rather significant differentiation. Therefore, the market is gradually pricing in a growth narrative for software companies: that when AI significantly boosts optimization efficiency and reduces marginal decision costs, platform software companies like Microsoft Corporation, Oracle Corporation, ServiceNow, and SAP may actually experience a "throughput increase + stronger unit economics" feedback loop instead of being completely replaced. If a software company can convert the wave of agency into increments (treating agency as a new entry point, forming billable calls/automation credits, or solidifying the efficiency gains brought by the agency into higher retention and stronger expansion) while having high migration costs, strong regulatory constraints, deep embedding in core processes, then oversold conditions often produce better risk-return ratios; however, if the product is mainly a single-point function that can be laterally supplanted by general-purpose agents and the business model heavily relies on seats and lacks data/process closed-loop integration, it may only be "the beginning of a valuation regression" rather than a one-time misjudgment. There are investment firms like Bessemer Venture Partners in the market that view this decline as an overreaction and are more inclined to invest in leaders with platform capabilities. In conclusion, as the sell-off of software stocks continues, the growth narrative of "AI reshaping software profitability" is quietly spreading, challenging conventional views and prompting investors to reevaluate various software companies based on their ability to adapt to the changing landscape of AI technology.