Apollo’s Sambur says software’s AI troubles will persist
Apollo Global Management‘s David Sambur told CNBC on Thursday that the sell-off in software stocks is not over yet due to fears of AI disruption.
“Unfortunately, I think it’s too soon,” Sambur, co-head of private equity, told CNBC’s “Money Movers.”
Some Wall Street analysts are relieved by the recent recovery IGV Software ETFIt rose nearly 3% in March after a poor start to the year. The ETF is still down 20% this year.
Sambur said its software names are under review and face critical questions about its revenue model, gross margin profile, competitive landscape with Anthropic and OpenAI, and valuations.
“I know markets are up and recovering a bit, but I don’t think any of those four things are going to change because there’s a real question mark as to what the impact of that will be. [is] “Artificial intelligence reduces the cost of competition and therefore increases the level of competition,” he said.
Sambur, who joined Apollo in 2004, said the departure from AI would be historic and “happen faster than I’ve seen at any point in my career.”
Part of the problem, Sambur said, is that the industry hasn’t figured out how the software story will evolve over the next one to five years because technology is constantly changing.
“No one knows,” he said.
“People are now readjusting valuations and getting more margin of safety for huge unknowns,” he added.
Sambur also noted opportunities to invest in deals or buybacks as a growing list of software names. Intuition, hubspot And sales forceannounced share buybacks.
But buyback announcements have been largely overshadowed by AI fears, RBC Capital’s Rishi Jaluria said in a note to clients on Thursday.
The debate on Wall Street right now is whether share buybacks are a bullish signal or companies are “waving a white flag,” Jaluria said. He added that buybacks make mergers and acquisitions less likely, which can limit innovation.
‘It’s one thing if companies finance buybacks with large cash balances on hand, but large buybacks mean less capital for future mergers and acquisitions, especially when debt is increased,’ Jaluria wrote.’
