Goldman Sachs Report: The emergence of agentic artificial intelligence (AI) could disrupt some companies in the software industry, but it may also create significant opportunities for many, according to a report by Goldman Sachs. The report noted that while AI is raising concerns about the future of software, it is also expected to expand the overall market, suggesting that investors should adopt a selective approach as the technology evolves.
It stated, “While AI could disrupt some firms, many may also benefit, reinforcing the idea that investors should be selective as AI technology continues to evolve.” Quoting expert opinions, the report suggests that while software has dominated industries for over a decade, the rise of new agentic AI tools for software development has sparked fears that AI could “eat” software, leading to a sharp re-rating of the sector.
However, Gabriela Borges, Goldman Sachs US Software analyst, said that “AI is software” and is essentially code designed to perform tasks. She expects AI to expand the software market but also increase competition by lowering the cost of coding. The report noted that the main risk for legacy software firms is that AI-native companies may capture new growth opportunities, while incumbents could be left with shrinking traditional roles.
However, Borges added that legacy firms are “innovating as fast followers” and could still leverage their domain expertise to remain competitive, though they need to prove this capability. Rick Sherlund, Founder and CEO of Sherlund Partners, said that AI will not replace software but rather transform it.
He described the current phase as similar to past technological shifts, adding that software is “being reborn around AI” and will require fundamental restructuring using large language models (LLMs) and AI agents.
Sanjay Poonen, CEO and President of Cohesity, also described AI as a transformative force, warning that companies must adapt quickly. “Just like any technology wave, you must surf this tsunami, or it will demolish you,” he said. The report added that stabilisation in the sector may take time. Goldman Sachs Chief US Equity Strategist Ben Snider said share prices in industries facing structural disruption tend to stabilise only when earnings stabilise.
The report also noted continued pressure in credit markets linked to software exposure, though risks remain manageable under a stable macroeconomic environment. Overall, the report outlined that investors should avoid binary views on the sector and instead focus on companies that can adapt, particularly those investing in AI-driven restructuring and strong technological capabilities. It stated, “This is not an environment for binary bets on software’s survival or collapse, but one that demands selectivity.
