For the first time, the high-multiple software industry faces a potential existential threat from AI. Even the possibility of disruption is enough to compress valuations, causing massive dispersion where indices look calm but underlying sectors are experiencing extreme rotation.

The "SaaS-pocalypse" isn't about AI replacing software overnight. Instead, AI's disruptive potential erases the decades-long growth certainty that justified high SaaS valuations. Investors are punishing this newfound unpredictability of future cash flows, regardless of current performance.

The recent software stock drawdown is not about poor current performance; many companies are still beating earnings. Instead, the market is pricing in a massive "terminal value risk" from AI, valuing companies as if they will decline in perpetuity, creating a historic disconnect between current fundamentals and long-term valuation.

The downturn in software stocks isn't tied to current earnings. Instead, investors are repricing the entire sector, removing the premium they once paid for its perceived safety and stable, long-term contracts, which are now threatened by AI disruption.

The current SaaS sell-off isn't driven by poor performance—growth and retention are stable. Instead, investors are pricing in a long-term, existential 'cliff risk' that AI will eventually make entire categories of software and knowledge work obsolete.

The AI wave is creating uncertainty about the long-term durability of SaaS revenue streams, which were once considered as reliable as insurance annuities. This doubt is driving a market-wide downturn for public SaaS stocks, as investors struggle to predict which companies will thrive or become obsolete.

The recent software stock wipeout wasn't driven by bubble fears, but by a growing conviction that AI can disintermediate traditional SaaS products. A single Anthropic legal plugin triggered a massive sell-off, showing tangible AI applications are now seen as direct threats to established companies, not just hype.

The recent $300B SaaS stock sell-off wasn't driven by current performance. Investors are repricing stocks based on deep uncertainty about whether legacy software companies or AI-native firms will capture the value of automating human labor in the next 3-5 years.

Investor uncertainty about the long-term viability of software business models due to AI is causing a fundamental shift in valuation. Instead of paying a premium for future growth, investors are now demanding immediate returns like dividends, effectively treating established software firms as value stocks rather than growth stocks.