panicking

Last February 23 was a disastrous day for some software giants. Companies like CrowdStrike, Expedia, AppLovin, Adobe or Datadog were prominent names on the list of S&P 500. Something they have in common is that they are software companies at a time when AI has eaten the technological news. They contrast with hardware companies, which are going like a rocket in full RAM memory crisis. And it all has to do with two things. Stock market volatility and panic that AI eats software. In short. These last few weeks, OpenAI and Anthropic have been very active. Apart from being in center of war to see what AI will be the one that powers the systems of the United States Department of Defense –that of OpenAI behind him Pentagon’s monumental mess with Anthropic-, they have presented models. And when these companies make a move, the software companies are shaking. Not so much because AI is going to eat up their market, since they are companies that are integrating their models or those of third parties into their systems, but because they are companies that have something in common: they are public and investors are extremely volatile. The WSJ pointed: February 23 was a disastrous date for software on the stock market. Panic. The situation has been normalizing since that day and many are recovering the price they had before rushing, but there is still something in the atmosphere. Investors believe, or can see, that those AI tools can cannibalize entire software suites of all kinds. What a human used to donow an AI can do it. And with agents knocking on the door, these investors no longer know how the companies in which they have money invested can respond. Therefore, those mentioned and others such as IBM or Blue Owl have become psychological victims in a scenario in which there are three specific fears: Companies that live on classic licenses and subscriptions must decide how much AI they put in to be in the conversation, but without destroying their business. Fear that agents can replicate actions at low cost, narrowing the sources of profit for investors. Fear of an AI cannibalizing a software suite. If OpenAI releases something tomorrow that ‘loads’ legal software, the company that makes that software will suffer the consequences, for example. Counterpanic. As always with the stock market, the aforementioned volatility comes into play and investors who bet their money do not have to know anything about the subject. They simply see bells and start to tremble. In the world of video games, a lot also happens with investors who do not know about the world, and we saw this precisely with Google’s AI that “”creates”” (and I’m missing quotes) video games. When Google introduced Genie 3the actions of a good part of the industry they fell plummeting. But, despite the falls, there are those who think that it won’t be that bad and that the market is exaggerating. The position of analysts at the Goldman Sachs firm is curious. On the one hand, they have been one of the catalysts for this fear of AI in the software segment, pointing out that there is an “existential” risk and certain jobs that can be carried by agents instead of by humans. However, the company’s own CEO has already pointed that things are being exaggerated and that these companies have plenty of capacity to pivot and adapt. Come on, as we pointed out, the movements of many investors are the result more of emotions than of realities. But of course, that implies something else: as point the firm, short positions have skyrocketed and long positions are falling, which indicates that fear of what will happen in the future is something that is the protagonist of the stock market conversation. Hardware holds up better. On the other side of the coin we see hardware companies. If there is fear of an AI that replaces software packages, those who have the power to create the components that are used to train and operate that AI see green numbers. TSMC either NVIDIA as a chip supplier. Samsung, SK Hynix, Micron or Phison as suppliers of memory and controllers. EITHER Western Digital and Seagate as storage providers. They are the same companies that are causing an unprecedented component crisis because they have allocated all of their production to the hardware that powers the data centers to train these AIs. How different the dynamics of hardware ones are compared to software ones. The agentic future. And you don’t have to go far from NVIDIA to sow more panic among investors. ITS CEO, Jensen Huang, commented recently that AI agents will reshape software companies. According to him, these companies will change the well-established models of subscriptions for absolutely everything with other models based on ‘rental’ of AI agents and specialized tokens. Huang isn’t saying those companies will suffer, but rather that they will have to rethink things if they want to become a much larger market than they currently are. Basically, he noted that “there will be no software that is not an agent” because companies will not be able to have software that is “dumb.” He is not the first to point out that direction and, although as we said, software companies have that necessary resilience, another thing is how the market responds and some investors who may choose to bet on something more “earthly”: infrastructure such as data centers. 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