Software stocks remain at the center of AI-driven disruption, creating sharp winners and losers. Atlassian illustrates the volatility. Shares soared to nearly $483 in 2021 as momentum investors piled into seat-based software models during the pandemic hiring boom. The 2022 bear market erased much of those gains, and another AI-fueled rally in 2024–2025 faded as it became clear not all software firms benefit equally from artificial intelligence. TEAM has now fallen roughly 83% from its peak, underscoring structural vulnerability.
The key divide lies in business models. Likely AI winners tend to control proprietary enterprise data, serve large customers, command high switching costs, and monetize through consumption or outcome-based pricing. They often have regulatory moats, mission-critical integration, strong balance sheets, and embedded enterprise relationships. By contrast, firms reliant on workflow tools, public data, small-business clients, or seat-based licensing face commoditization and AI substitution risk, increasing churn and revenue pressure.
This shakeout presents opportunity as valuations reset and differentiation becomes clearer. Selectivity is critical, as performance will not move in a straight line.
Macro data offered support, with durable goods and housing starts beating expectations. Markets now await FOMC minutes and Friday’s PCE inflation data, both potential catalysts. Key stocks to watch include $TEAM, $MSFT, $CRM, $NOW, and $ORCL.
Responsible Investor 