Selloff in software from AI sets stage for potential big year of M&A

Cloud software stocks started this year where they left off in 2025: sell mode.

The ongoing downward spiral is setting the stage for a buying frenzy, investors told CNBC.

WisdomTree Cloud Computing FundThe Nasdaq, which tracks cloud software, is down more than 8% so far this year, while the Nasdaq is up slightly. Leading software names like sales force, ServiceNow And Adobe’s It is down more than 14% following the market’s significantly underperformance a year ago.

The key concern is that AI will eventually displace key pieces of the enterprise stack as IT buyers turn to AI agents to handle tasks currently handled by software vendors both large and small. These fears were further fueled last week when Anthropic released an AI agent tool called Claude. collaboration It is aimed at corporate customers.

The software disruption occurred today and will force many mid-sized software companies to seek financing options, potentially spurring buyouts by private equity, said a senior investor at a large private equity fund, who requested anonymity to speak publicly about the matter.

Orlando Bravo, co-founder of software-focused buying firm Thoma Bravo, is looking to buy the dip and sees value in companies developing their own agent solutions to work with their existing systems.

“We’re seeing incredible acquisition opportunities right now,” Bravo told CNBC’s Sara Eisen in Davos on Wednesday. He said his firm is making deals and “will be much more active.”

While investors like Bravo remain optimistic about software in a world dominated by artificial intelligence, analyst Jackson Ader of KeyBanc sees real vulnerabilities. In August, it conducted an analysis of the major threats facing the software, which it later said seat-based app companies were: Monday.com, asana And Filiz Social are the most exposed. All three stocks see double-digit declines in 2026.

In the same note to customers, Bader said these companies are not tied to a system of record like enterprise resource planning, or ERP, and customer relationship management, or CRM, and have not yet become multi-product platforms. Representatives for Asana and Sprout did not respond to requests for comment Monday.

Even companies with a broader product line and more established corporate footprint face serious market skepticism.

Salesforce CEO Marc Benioff has defended his company for months, trying to reassure investors that the company is well positioned for artificial intelligence.

At Davos, Benioff told Eisen that the company’s last quarter was “the best quarter we’ve had in our career” and that “we are one of the largest cash-generating companies in the world.”

“But that’s not enough,” Benioff said, referring to market action. “Because if you’re not producing a major language model, you’re definitely not in fashion right now.”

ServiceNow is responding to the pressure by joining the potential competition. On Wednesday, the company announced a deal with OpenAI to use its models to deliver artificial intelligence agents to commercial customers.

The news did not ease concerns. ServiceNow shares fell 17% in January, falling for six consecutive trading days before rising on Thursday.

HubSpot, Atlassian And Hard solder Shares of each are off to an even worse start to the year, down more than 20%.

Rishi Jaluria, an analyst at RBC Capital Markets, told CNBC that the recent downturn in software stocks may force some companies to “explore strategic alternatives” and that new deals without a compelling AI angle won’t gain much traction with investors.

In a note published in late November, Jaluria highlighted Asana: Box And DocuSign as potential acquisition targets in software. The companies did not respond to requests for comment.

As tech earnings season ramps up next week, Wall Street will begin to get a clearer picture of where specific companies stand on adopting or being swallowed by AI.

Luria said one of the key questions is how quickly AI agents like Claude’s Cowork move beyond developing new code and actually automate different parts of the software lifecycle. This timeline will be critical to understanding the reality of the AI ​​threat and how soon cloud software companies may feel the pain.

— CNBC’s Noah Broder contributed to this report.

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