Software and AI: should we really be worried?

Valuations under pressure

In the space of a few weeks, the largest capitalisations in the software sector have suffered significant declines on listed markets. This dynamic has been fuelled by a single concern: AI could reduce the cost and complexity of software development, undermining the long-term revenues of established publishers.

These figures give pause for thought. But before drawing hasty conclusions, it is worth recalling why software remains, by nature, one of the most resilient asset classes for Private Equity investors.

Why software remains an exceptional asset class

The global software market is worth approximately $1.2 trillion in 2025, representing 20% of total IT spending. Segment growth stands at 14% this year, and global IT spending is expected to exceed $6 trillion in 2026. This structural momentum is driven by the continued digitalisation of businesses, cloud adoption, cybersecurity and the integration of generative AI.

Software offers the rare combination of double-digit organic growth, high margins and recurring revenues, independently of AI.

This is further supported by a still highly fragmented market, offering considerable consolidation potential for buy-out investors. The SaaS model provides cash flow predictability rarely seen elsewhere, with very limited capex requirements and natural downside protections.

The diagnosis: two structural shocks driven by AI

To understand the scale of the current readjustment, it is necessary to identify the two major transformations that AI is bringing about in the sector.

1. The collapse of the per-licence model

For twenty years, SaaS has rested on a simple equation: 1 employee = 1 licence. A company with 100 sales staff subscribes to 100 CRM³ licences. This model has generated predictable, scalable and defensive recurring revenues.

2. The erosion of barriers to entry: "vibe coding"

The second shock stems from the democratisation of software development. The emergence of "vibe coding", the ability to generate complex applications through natural language without technical expertise, is transforming code into a commodity.

The direct consequence: companies may be tempted to develop their own solutions in-house, reducing their dependence on third-party publishers. SaaS products historically chosen for their simplification value and cost reduction in development now find part of their value proposition called into question.

Our perspective at Opale Capital

This market correction does not signal the end of software as an asset class. It is accelerating its recomposition. The players that survive and thrive will be those that integrate AI as a lever for value expansion, rather than treating it as a mere additional feature.

In Private Equity, we remain convinced that the sector's fundamentals, namely recurring revenues, margins and consolidation potential, remain intact. The shocks described above also create opportunities: valuations are compressing, quality assets are becoming accessible, and buy-and-build strategies are regaining strong industrial logic.

AI is a catalyst for disruption, but also an accelerator for well-positioned players. It is this ambivalence that we seek to exploit.

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Sources:
‍Discussions and reports from: PSG Equity, Keensight Capital, Marlin Equity Partners, Goldman Sachs AM, KKR, Vista Equity, A16z Newsletter.
Gartner, "Gartner Forecasts Worldwide IT Spending to Grow 9.8% in 2025", January 2025.
Gartner, "Gartner Forecasts Worldwide IT Spending to Grow 7.9% in 2025", July 2025.
Gartner, "Gartner Forecasts Worldwide IT Spending to Grow 9.8% in 2026, Exceeding $6 Trillion For the First Time", October 2025.
CloudZero, "SaaS Gross Margin Benchmarks 2025"; Benchmarkit, "2025 SaaS Performance Metrics".
SaaS Capital, "2025 Benchmarking Metrics for Bootstrapped SaaS Companies".

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Investing in private assets carries a risk of capital loss. The products presented are closed-ended funds, illiquid by nature, which may carry currency risk. Past performance is not a reliable indicator of future results and target performance is not guaranteed.‍

Definitions:
¹Data taken YTD (Year-to-Date) as at 31/03/2026.
² SaaS: Software as a Service is a software distribution model in which applications are hosted in the cloud and accessible via a web browser.
³ CRM: Customer Relationship Management is a tool (often a SaaS solution) used by companies to centralise and manage all interactions with their clients and prospects.