From Goldman Sachs to Blackstone, Wall Street giants came to stand up: software will not collapse

# Long Yue

Executives from Goldman Sachs, Blackstone, Apollo, and KKR share a unified view: market fears that AI will bring about the demise of the software industry are greatly exaggerated. While acknowledging that AI will trigger a “severe tech cycle” and disruption, the firms believe large, well‑established software companies will be protected — and even emerge as beneficiaries. They have also clarified that their exposure to the software sector remains manageable.

In response to the heavy sell‑off in software stocks driven by “AI threat” narratives, top executives at major Wall Street institutions are seeking to send a clear message to investors: rumors of the end of software companies are vastly overstated.

Last week, shares of software giants including Salesforce and Adobe plunged sharply, wiping out hundreds of billions of dollars in market value, following news that AI startup Anthropic had released new tools. Panic spread across markets as investors feared AI would replace traditional software functions and destroy the industry’s business model.

In response, executives from Goldman Sachs, Blackstone, Apollo Global Management, and KKR have spoken out extensively this week. They argue that the current market reaction amounts to indiscriminate selling. While AI will indeed bring disruption, they say the view that all software companies will become obsolete is overly broad and unsupported.

Alongside calming market sentiment, these Wall Street giants are also playing down their own exposure to the software sector. They emphasize that although software has long been a popular target for private equity investment, portfolio diversification is sufficient to cushion volatility in any single industry, and some firms have already adjusted their positions in advance.

## The “severe tech cycle” and the question of pricing power

Despite the overall reassuring tone, top investors have not denied the industry’s coming transformation. John Zito, Co‑President of Apollo’s Asset Management business, told CNBC on Wednesday that the software industry will not disappear — but its business logic will change.

“Nobody at Apollo thinks software is going away. In fact, we actually think usage of software is going to go up materially,” Zito said. “It’s just a question — how much are you going to pay for it?”

Zito warned that the market will go through a “very severe tech cycle” with clear winners and losers. He specifically urged investors not to judge software companies’ prospects based solely on current revenue performance, since many still appear healthy. He used a vivid analogy: “It’s like saying BlackBerry was going to be just fine when the iPhone 1 came out.”

## Root of the panic: AI’s threat to the subscription model

The immediate trigger for the market rout was Anthropic’s announcement of new legal tools for its Cowork assistant, designed to assist with drafting and research tasks. The news sparked fears over the fate of a wide range of software providers, sending shares of Salesforce and Adobe tumbling last week and extending losses on Wednesday.

Even before Anthropic’s announcement, investors were already uneasy about the hundreds of billions of dollars flowing into AI and the industries it could disrupt. Software companies were seen as particularly vulnerable, given their typical reliance on subscription and licensing fees for revenue.

For years, software businesses have been prized assets for private equity firms and lenders thanks to high profit margins and stable recurring income. A sustained collapse in software valuations could mean heavy losses for these investment institutions.

## Differentiated opportunities amid indiscriminate selling

Amid the industry‑wide decline, Michael Chae, Chief Financial Officer of Blackstone, called the market reaction irrational. Speaking at a Bank of America conference on Tuesday, he said that while recent trading in the sector has been indiscriminate, outcomes will diverge over time.

“We expect larger, well‑entrenched enterprises to be better protected and, in many cases, to be beneficiaries of AI,” Chae said. He stressed that the market should not uniformly bearish on all software assets.

David Solomon, Chief Executive Officer of Goldman Sachs, struck a similar tone at the UBS conference on Tuesday. He acknowledged that the firm expects AI to disrupt markets but argued that “the narrative over the last week has been a little bit too broad.”

## Giants reassure: exposure is “immaterial”

While defending the industry, major institutions are also reassuring investors about their own safety.

Robert Lewin, Chief Financial Officer of KKR, said at the UBS conference earlier this week that the investment diversity of large asset managers will help shield them from AI‑driven disruption. He disclosed that roughly 15% of KKR’s private equity investments are exposed to software companies, representing about 7% of total assets.

Lewin also noted that the firm sees risks from AI adoption and has sold some businesses in recent years.

Goldman Sachs’ David Solomon was more direct in downplaying risks, stating that the firm’s exposure to software investments is “immaterial to us relative to the overall size of our platform.”

Source: Wall Street CN

# Risk Warning and Disclaimer

The market is subject to risks, and investment involves caution. This article does not constitute personal investment advice and does not take into account the specific investment objectives, financial situations, or needs of individual users. Users should consider whether any opinions, views, or conclusions in this article are appropriate to their specific circumstances. Investment decisions based on this article are made at one’s own risk.