Summary of Key Points
Three months ago, the market was shouting that "AI would kill the software industry," leading to a collective plunge in software stocks. However, recently, software stocks have rebounded strongly, with many companies reaching record highs. The reason behind this is that financial reports have exceeded expectations, proving that AI is not a "killer" but rather a "booster." This is evidenced by the explosive growth of AI businesses at companies like Snowflake and Salesforce, as well as the transition of AI from demonstration stages to actual production use in enterprises. NVIDIA CEO Jensen Huang has also provided reassurance, stating that AI will present the software industry with its greatest opportunities yet. While AI has not destroyed the software industry, it is reshaping it, bringing new revenues while also posing challenges such as the need for business model adjustments and increased competition.
Detailed Analysis
#### 1. The Reversal from "AI Will Destroy Software" to Surging Stock Prices: The Truth Behind the Three-Month Turnaround
- The initial panic: In February, the release of the AI programming tool Claude Code caused widespread concern. People feared that AI would directly write code and generate reports, rendering software obsolete and questioning the viability of SaaS companies' per-user pricing models. Global software stocks tumbled, with IBM experiencing its worst daily decline in 25 years.
- The key to the current rebound:
- Financial reports dispelling fears: Snowflake, a data cloud company, saw its revenue grow by 33% in the first quarter and signed a $6 billion partnership with Amazon, causing its stock price to rise by 50% in two days. Salesforce's AI business generated over $1.2 billion in annual revenue, a 205% increase. Okta, a company specializing in identity verification, saw a 16% increase in remaining orders, ensuring future revenue stability.
- Huang's counterarguments: He argued that AI will create more demand for software, as AI agents need software tools to function effectively. The number of GitHub code submissions is still doubling, and the workforce of software engineers is increasing, indicating that AI is not taking jobs away from humans.
- Surging industry ETFs: The software index fund IGV rose by 21% last month, achieving its best monthly performance since 2001, indicating a return of market confidence.
#### 2. AI Is Not a Killer; It's a New Revenue Source for Software Companies
AI has not replaced software but has instead opened up new business opportunities:
- Surging demand for data infrastructure: As enterprises use AI agents, they need to store, retrieve, and manage large amounts of data, benefiting companies like Snowflake, which saw its remaining orders increase by 38% due to the adoption of its AI services by 13,600 customers.
- Increasing emphasis on security: With the rise in AI agents, there is a growing need for secure identity management solutions, such as those provided by Okta. Management at Okta has stated that AI agents require the same level of security as human employees.
- Creative software gaining traction through security: Tools like Midjourney can generate images, but companies are concerned about copyright issues. Adobe's Firefly, which has commercial copyright, saw its annual revenue exceed $250 million and the company raised its full-year forecasts.
#### 3. Which Software Companies Will Thrive in the AI Era?
The industry will see differentiation, with certain types of companies being more stable:
- Data infrastructure: Companies like Snowflake (data storage) and MongoDB (cloud databases) are essential as AI relies on data.
- Security management: Services provided by Okta (identity verification) and Datadog (observability) are in high demand as AI systems become more complex.
- Workflow integration: Companies like Adobe (integrating AI with existing design processes) and Salesforce (integrating AI agents into customer management solutions) offer comprehensive, readily usable solutions that enterprises need.
#### 4. New Challenges for the Software Industry
The rebound does not mean there are no risks:
- Some companies still under pressure: Salesforce and Adobe's stock prices have dropped by 20% since the beginning of the year, and Salesforce's second-quarter revenue forecasts fell short of expectations, indicating that the value of AI businesses remains to be proven.
- Rising costs: AI requires more servers and energy, which may lead to decreased profit margins for software companies.
- Competition from large AI vendors: Vendors like OpenAI and Anthropic are entering the enterprise application market, competing directly with software companies.
- Changing business models: The traditional per-user pricing model (more employees = more software licenses) may need to be replaced by usage-based or task-based pricing models.
#### 5. Huang's Reassurance: AI Creates Greater Demand for Software
In his speech, Huang countered the notion that AI will disrupt the software industry:
- "Some say AI will cause software companies to go out of business, but I believe the opposite. In the future, there will be countless AI agents that will rely even more on software tools."
- He cited data showing a doubling of GitHub code submissions from 300 million in 2023 to over 500 million in 2025, indicating that software engineers are becoming even busier.
- The core logic: AI does not replace software but expands its use cases, leading to increased demand.
In Conclusion
AI has not killed the software industry; instead, it has shifted its focus. Companies that can leverage core capabilities such as data management, security, and workflow integration will thrive, while those that cannot will be left behind. For the general public, this means that opportunities in the software industry still exist, but the approach to doing business has changed.