ISTANBUL
Significant and rapid advancements in artificial intelligence (AI) technology reshape business models in the software sector, while experts speculate that rising investment needs and competitive pressures could squeeze profit margins and trigger selling pressure on software stocks.
Long-term optimism over global AI and tech investments is very much alive, and in fact, AI is expected to change business models and eliminate the need for human labor in some sectors if, or when, integrated into the economy.
As technology advances day by day, successive strategic AI partnerships contribute to the fast momentum of transformation in the sector, while expectations that the demand for some traditional software may weaken stoke the fire that is the selling pressure on firms operating in the sector.
After Meta announced a multi-year partnership with chipmaker Nvidia to advance its long-term AI infrastructure roadmap, a new collaboration came to the fore.
Oracle and Nvidia decided to expand their collaboration on infrastructure integration to accelerate the reasoning models of AI applications to enhance businesses and quicken autonomous tasks.
Analysts say that the wide adoption of generative AI means that many software functions can be performed by AI instead, which fuels the fears that this could result in shrinking profit margins in software.
Software and cybersecurity firms started the week on a bearish note on Monday, following AI firm Anthropic’s announcement on Feb. 20.
Anthropic’s Claude Code is an AI-powered “agentic” assistant that works as a code auditor, which means it can look for vulnerabilities itself and warn the programmer.
Cybersecurity investors felt the threat of Claude Code, as following these developments, US-based Palo Alto Networks shares lost 10.9%, CrowdStrike 9.6%, Fortinet 6.5%, and Salesforce 2.4% on Feb. 20.
On Monday, CrowdStrike shares fell nearly 10%, Zscaler over 10%, Okta 6.4%, and Fortinet 5.5%.
Software firms specializing only on finance, production, inventory, human resources, and sales, instead of cloud and database solutions, may lose footing in the short term, while firms that lag behind in AI integration could see their competitive edge erode and their stock performance under pressure, analysts say.
Tim Waterer, chief market analyst at Australian KCM Trade Global, told Anadolu that markets are still trying to assess “whether efficiency gains will be great enough to offset the negative economic impacts, which could arise should vast white-collar jobs be wiped out due to greater AI adoption.”
Waterer stated that capital expenditures in AI are putting pressure on tech firms to deliver significant returns on the investments.
“I think traders are growing increasingly discerning about which AI companies can justify the present high valuations versus those that can’t,” he said.
“There will be pressure on tech firms to deliver profitability given the large expenses on AI investments — if returns on investment don’t materialize, then tech companies will face further scrutiny from traders and may be facing greater downside pressures,” he added.
- ‘AI is like a tsunami hitting the global labor market’
OpenAI CEO Sam Altman said that the job market will be affected as AI can increasingly perform tasks traditionally done by humans better, speaking at an AI conference in India.
Altman said the developments in AI will change how work is done across sectors, including repetitive and data-driven tasks, while technological advances will create new job categories that did not exist before.
The widespread adoption of AI led to 55,000 layoffs in the US last year, according to consultancy firm Challenger, Gray & Christmas.
While US inflation slowed but persisted last year, tariffs led to higher costs, and firms sought cost-cutting measures, the cost-reducing advantage of AI became attractive as a short-term solution to the rising problems.
IMF Director Kristalina Georgieva said that AI has become an important factor in economic growth, speaking at the World Economic Forum held in Davos in January.
She said that most countries and businesses are not ready for the impact of AI in labor.
“AI is like a tsunami hitting the labor market,” said Georgieva in an interview with India Today on Feb. 20.
“We assess 40% of jobs globally, 60% of advanced economies to be impacted by AI in the next few years, either enhanced, made more productive, or replaced,” she added.
* Writing by Emir Yildirim.
