1 day ago
Dan Niles Rethinks Software Stocks as AI Trade Reverses
Software stocks sharply outperformed semiconductor stocks from June 22 through August 28.
Dan Niles says AI agents could use software 10 to 100 times more often than humans.
Atlassian, Workday and Salesforce posted developments that improved sentiment toward software companies.
Niles still calls AI a bubble and warns that some software companies may fail.
He believes database and cybersecurity companies may prove more resilient than commoditized workflow tools.
- Who
- Technology investor Dan Niles, along with software companies including Atlassian, Workday and Salesforce.
- What
- Niles is reconsidering his negative view of software stocks as AI-related market trends and corporate results improve.
- Where
- In financial markets, particularly the United States technology and software sectors.
- When
- The shift followed market moves beginning June 22, 2026; Niles discussed it in an August 30, 2026, post.
- Why
- AI agents may increase software usage, while recent earnings, guidance and acquisition interest have challenged the assumption that AI will broadly make software obsolete.
AI Could Expand Software Demand
AI Could Disrupt Software Companies
Effect of AI agents
AI Could Expand Software Demand
AI agents may access and operate software much more frequently than humans, creating additional demand for software products.
AI Could Disrupt Software Companies
AI could perform tasks traditionally handled by software products and make some tools less valuable or obsolete.
Software-sector outlook
AI Could Expand Software Demand
Recent results and market gains at Atlassian, Workday and Salesforce suggest investors may have been too negative about the broader software industry.
AI Could Disrupt Software Companies
Niles says some software companies, particularly more commoditized workflow businesses, face a genuine existential threat and could fail.
AI investment cycle
AI Could Expand Software Demand
The AI buildout could produce significant economic and technological opportunities, including for software companies that support AI use.
AI Could Disrupt Software Companies
Niles considers AI a bubble, warns that companies may over-order chips and says some sectors could eventually fall 30% to 50%.
Key facts
- Software ETF performance
- The IGV software ETF rose 25% from June 22 through August 28.
- Semiconductor index performance
- The SOX index fell 22% over the same period, after rising 62% earlier in 2026.
- AI agent usage estimate
- Niles cited estimates that AI agents could use software 10 to 100 times more often than humans.
- Atlassian stock move
- Atlassian shares rose 35% after strong earnings and guidance on August 6.
- Workday stock move
- Workday shares rose 18% after reports that Silver Lake could pursue an acquisition, and gained 6% after its August 27 earnings.
- Salesforce stock move
- Salesforce shares rose 23% after reporting results and guidance on August 26.
- AI revenue run-rate
- Niles said Anthropic and OpenAI's combined annualized revenue run-rate increased from $29 billion to $105 billion in seven months.
Quotes
Dan Niles
Technology investor and founder of Niles Investment Management
“You have 100 companies that each think they’re going to get 50% market share. That’s not going to work.”
financialexpress.com
“There’s some real companies that are going to go to zero in the software space.”
financialexpress.com
Sources
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