Crypto KOL Bitwu.ETH posted on X that U.S. software stocks are facing their worst annual start in years, coinciding with the Nasdaq nearing historical highs. Traditional SaaS companies have seen significant weekly declines, largely attributed to the release of Claude Cowork AI, which has demonstrated unprecedented capabilities and accelerated the divergence in performance within the software and technology sectors.
Over the past decade, the U.S. software sector has benefited from three major advantages: low interest rates leading to minimal discount rates and maximized future cash flows, the SaaS model offering high margins and renewal rates allowing for long-term value narratives, and the cloud transformation providing growth premiums for certainty. This resulted in a typical phenomenon where SaaS companies with high growth and attractive ARR could receive valuations of 15–30 times, even if they were not profitable.
However, the emergence of AI has shifted the landscape, reducing the marginal cost of certain software functions to nearly zero. This has led to a noticeable migration of capital from application-layer SaaS to AI infrastructure, computing power, chips, and platform-level models. Given this trend, regardless of how low stock prices may be or the extent of their decline, there seems to be little justification for holding software stocks at present.