Remember when artificial intelligence was supposed to kill software?
That was a fun one.
All year, we’ve been hearing about the death of software. AI was going to replace everything.
Nobody would need software companies anymore because we’d all just tell our AI assistants what to do, and they’d handle the rest.
They even came up with a name for it, the “SaaSpocalypse.”
I think that’s how you spell it.
The point was that software companies were in big trouble, and investors needed to get out before AI put them all out of business.
Well, I have some bad news for the SaaSpocalypse crowd.
Software stocks keep making new all-time highs.
Back-to-back days this week:
And we’re not talking about a handful of giant technology companies dragging the rest of the industry higher.
We’re talking about an equally weighted basket of more than 100 software stocks in the S&P Software Index.
That means every stock gets the same vote. The biggest companies don’t get to dominate the results just because they’re bigger.
More than 100 software stocks, all getting equal treatment, and the index is making new all-time highs.
Somebody forgot to tell the stock market that software was dead.
The Market Didn’t Get the Memo
Here’s what I find so fascinating about all of this.
While people were arguing about whether AI would destroy the software industry, investors were buying software stocks.
And buying enough of them to push the entire equally weighted index to levels we’ve never seen before.
That’s not exactly what you’d expect from an industry that’s supposedly going extinct.
Think about what an all-time high actually means. At no point in history has this particular basket of software stocks traded at a higher level.
Never.
Now, that doesn’t mean every software company is doing great. Of course not.
Some companies will lose customers. Some will get replaced. Some will probably disappear altogether.
That’s how business works. New technology creates winners and losers.
But the idea that AI is going to destroy the entire software industry?
That’s a pretty difficult argument to make when the industry itself is breaking out to new highs.
Maybe AI isn’t killing software. Maybe software companies are among the biggest beneficiaries of AI.
That’s certainly possible, isn’t it?
AI can do some incredible things. But you still need something for it to work with.
You need systems, information, applications, and tools that help people and businesses actually get things done.
Who do you think is going to provide a lot of that?
Software companies, I guess.
I don’t pretend to know exactly what the software industry is going to look like five or ten years from now. Nobody does.
But I do know what investors are doing with their money today. And I do know the market is a forward-looking discounting mechanism.
When I see investors are buying software stocks at a rate we’ve never seen before, I should probably pay attention.
In fact, we’ve been buying software stocks ourselves. We’re already participating in this trend.
And if the market continues to reward these companies, there’s a good chance we’ll be buying more.
Why would we want to fight that?
Don’t Play Hate. Participate.
Here’s the other part of this story that I can’t stop thinking about.
According to the latest survey from the American Association of Individual Investors, almost half of individual investors expect stocks to fall over the next six months.
Almost half!
Now, everybody’s entitled to an opinion. If you think stocks are going lower, that’s fine.
But I look around at what’s happening in the world, and I genuinely wonder what everybody’s so afraid of.
We’re living through one of the most extraordinary technological transformations of our lifetimes.
Tools that would have seemed impossible just a few years ago are now available to practically anyone with an internet connection.
And they’re getting better all the time.
I wrote about this recently in What Are the Other 98% of You Doing?
I really do wonder how many people are actually spending time experimenting with these tools.
Maybe I’m living in my own little bubble.
Maybe because I’m playing with this stuff every day, I assume everybody’s doing the same thing.
But the more I talk to people, the more I realize that a lot of them haven’t even started.
They’re hearing about AI on television. They’re reading scary headlines about jobs disappearing and entire industries getting wiped out.
They’re arguing about whether this is all one giant bubble.
Meanwhile, other people are using these tools to build businesses, create products, solve problems, and do things that weren’t possible before.
I can’t help but think there’s a connection between the people who are afraid of this technology and the people who haven’t bothered to try it.
Now we have software stocks making all-time highs while investors are still being told that AI is going to destroy software.
You can’t make this stuff up.
Growing up in Miami in the 1980s and ’90s, they had a saying:
“Don’t player hate. Participate.”
I still remember that!
And it applies perfectly to what’s happening right now.
You can sit around complaining about AI. You can keep telling everybody that software is dead.
You can spend your time looking for reasons why all of this is going to end badly.
Or you can actually participate.
Learn how to use the technology. Pay attention to the companies benefiting from it.
And when the stock market starts rewarding those companies, don’t be afraid to own them.
That’s what we’re doing.
We don’t need to know exactly how the AI revolution is going to play out.
We just need to keep looking at the evidence and adjusting as things change.
Right now, the evidence is telling us that software stocks are winning.
So we’re going to keep participating for as long as that remains true.
Everybody else can keep waiting for the SaaSpocalypse.
I’d rather own the stocks.