New Era for the Industry: AI Devices Transform the U.S. Software Stock Landscape

The beginning of 2026 marks a significant turning point for the American technology sector. Software stocks are facing the heaviest selling pressure in years, even as the Nasdaq index continues to approach all-time highs. This phenomenon is not just a typical market correction but a reflection of fundamental shifts in how value is created and distributed within the digital software ecosystem.

Traditional Software Advantages That Are Starting to Fade

Over the past decade, software companies enjoyed three main competitive advantages that anchored their valuation bases. First, low interest rates resulted in minimal discount rates, making future cash flows worth much more. Second, the SaaS (Software-as-a-Service) model offered highly profitable margins with recurring renewal cycles, creating a long-term value narrative that attracted investors. Third, the cloud computing transformation provided substantial growth premiums to companies that successfully migrated to digital platforms.

These factors combined to create a unique phenomenon in the capital markets: high-growth software companies with impressive annual recurring revenue (ARR) can be valued at 15–30 times revenue, even if they have not yet reached breakeven. However, this advantage is now being challenged by the emergence of advanced artificial intelligence devices.

AI Devices Changing the Economic Equation

The launch of the latest generation of AI devices, including technologies like Claude, has demonstrated industry-changing capabilities. In a short period, these extraordinary capabilities have accelerated polarization in the performance of the software sector and technology as a whole.

The most critical impact is the reduction of marginal costs for specific software functions to nearly zero. Tasks that previously required significant investment in development can now be handled at minimal operational costs using general AI devices. This creates unprecedented price disruption and forces a fundamental reassessment of traditional software stocks.

Capital Shift: From Applications to Infrastructure

Market pressures are clearly reflected in investor capital allocation patterns. There is a tangible migration of funds from application-level SaaS companies toward AI infrastructure, computing capacity, semiconductor chips, and platform-level models. Investors collectively recognize that future value lies not in traditional software applications but in the technological foundation that runs AI devices themselves.

Difficult Questions for Software Investors

Given these transformative trends, the prospects for recovery in traditional software stocks look bleak. Regardless of how low prices may fall or how deep the correction, it is difficult to find strong fundamental justification to hold positions in software stocks today, except with very specific theses. The market paradigm has shifted, and investors must adjust their positioning to align with this new reality.