When Everyone Is Selling Software, Maybe The Real Trade Is In Who's Already Broken

By Viktor Volkov | Against the Grain

Everyone seems convinced that AI is an existential threat to entire software business models. The panic is palpable: Dassault Systèmes gets a downgrade and tanks 8% on vague “AI fears.” A professional fund manager, as highlighted in a Reddit-shared Bloomberg piece, declares most software firms won’t survive, having sold nearly all his holdings. The consensus is clear: the “plumbing” for AI (chips, memory, hard drives) will thrive, while the applications built on top are doomed to be disrupted. But let’s examine what the crowd might be missing.

First, the reaction feels disproportionate and indiscriminate. The top comment on the Dassault post rightly points out: “The idea that complex professional software is going to be replaced by heuristic systems like LLMs is laughable.” This isn’t Canva vs. Adobe; this is multi-physics simulation software. The market is tarring engineering and enterprise software with the same brush as consumer-facing apps, ignoring deep moats of integration, regulatory compliance, and specialized data. The fear is real, but the sell-off is creating classic “babies thrown out with the bathwater” scenarios where robust business models are being priced for extinction.

Second, the data from the ground contradicts the total despair. Western Digital announcing its entire 2026 HDD capacity is sold out to hyperscalers isn’t just a chip story. It’s a data story. AI needs vast, cold storage for training data and logs. Where does that data live, get managed, and get processed before it’s useful? In enterprise software environments. The idea that the infrastructure is booming while all the software that organizes and utilizes that data is worthless is a cognitive dissonance the market hasn’t resolved. The panic assumes displacement, not augmentation.

Finally, consider the retail sentiment. A popular post on r/investing asks if all software companies except chip makers are going down. The top-voted reply is the only sane one: “You’re comparing Microsoft to Adobe… I think you should buy the S&P 500 and chill my dude.” This is the heart of the matter. MSFT is the world’s largest software company and is down. The crowd is conflating cyclical pressure and valuation reset with permanent impairment. When the fear is this broad, the contrarian looks for the names where the disruption narrative is weakest but the punishment has been severe.

What If I'm Wrong?

If AI adoption accelerates faster than legacy vendors can adapt, and truly does compress software margins and disintermediate incumbents, then this sector could face a prolonged downturn akin to media in the 2000s. The crowd would be right to flee.

Methodology Note: Analysis based on 450+ posts and 5,200+ comments from Reddit's investing communities over the past 24 hours. The contrarian take here is driven by the extreme binary thinking (chips good, software bad) and the historical tendency of markets to overcorrect on disruption fears. Confidence: 70%.