The Great Software Selloff of 2026

$4 trillion versus $350 billion. That's the market cap gap between Google and Anthropic – and it tells the story of 2026's great software reckoning. While AI infrastructure companies soar, traditional software stocks are getting hammered, with the WisdomTree Cloud Computing Fund down 20% this year and individual companies like HubSpot falling 39%.

When AI Becomes the Competition

The selloff isn't just numbers on a screen – it reflects a fundamental shift in how businesses think about software. Anthropic'sClaude Cowork now handles legal documents, financial analysis, and marketing copy. What took specialized software companies decades to build, AI can now replicate in seconds.

Box CEO Aaron Levie calls this "the most exciting moment" in his company's 20-year history, but Wall Street sees existential threat. His stock is down 17% this year. Salesforce, despite CEO Marc Benioff's confidence about having "all the customers' data," has lost 25% of its value.

The cognitive dissonance is real. Software executives see AI enhancing their products while investors see AI replacing them entirely.

The Disruption Playbook Reversed

Ironically, software companies that once disrupted traditional industries now face their own disruption. The same venture capitalists who funded these companies are now betting against them. Anthropic just secured a $10 billion funding round at a $350 billion valuation, while OpenAI eyes over $800 billion.

Yet some investors are calling this panic overblown. Stifel analysts note that despite "broader fears of AI-related disruption," they're not seeing actual IT buyers strip out software solutions. Bessemer's Byron Deeter sees opportunity: "Chaos creates opportunity! A lot of money is about to be made."

The Enterprise Reality Check

ServiceNow's CEO Bill McDermott argues his products serve "as the semantic layer that makes AI ubiquitous in the enterprise" – essentially positioning traditional software as AI's necessary infrastructure rather than its victim.

This raises a crucial question: Do businesses really want to manage AI tools themselves, or would they rather pay specialized vendors who handle the complexity and liability? Box's Levie believes the latter, arguing companies prefer to "pay for products and services from a vendor" rather than "do it themselves and carry all the liabilities."

Investment Implications

For investors, this presents a classic value versus growth dilemma. Traditional software companies trade at beaten-down valuations while AI pure-plays command premium multiples. Cantor analysts see Monday.com's29% drop as creating an "attractive setup," betting that current fears exceed actual disruption.

The market has essentially decided that infrastructure companies and AI model developers are winners, while software companies are losers – regardless of current business strength. But history suggests that such binary thinking often misses nuance.