Software stocks face terminal value risk from AI
The bear case argued for traditional software stocks is that agentic AI is destroying their terminal value and pricing power, leading to a structural decoupling from Bitcoin.
The argument
The guest argued that in a deflationary, code-based world, software margins are in a free fall because 'your margin is my opportunity' applies to code. This is causing software stocks (tracked by the IGV ETF) to underperform while hardware and physical bottlenecks capture the value.
The thesis, stress-tested
✓ What validates it
- ✓Continued downward revisions in guidance from major software firms during earnings seasons
- ✓Further breakdown in the correlation between software indices and hardware/semiconductor indices
▸ Risks discussed
- ▸Software companies may successfully integrate AI to lower their own labor costs and preserve margins
- ▸Valuations may have already priced in much of the downside after recent steep corrections
Hear it yourself
"And I said that if you look at what's performed so far this month within the IGV, which is the software ETF, almost all of the top 10 names were related to crypto. So let's separate Bitcoin for a second."
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