Top-performing fund warns software firms face ‘existential threat from AI’: report | Latest Tech News
A top-performing asset supervisor is warning that few software firms will survive the fast growth of artificial intelligence – which may doubtlessly automate most of their companies.
Nick Evans, a Polar Capital fund supervisor, noticed his $12 billion global technology fund beat 99% of friends over a one-year period and 97% over 5 years by promoting off software shares forward of the gang, according to a Bloomberg report.
“We think application software faces an existential threat from AI,” Evans told Bloomberg.
A top-performing asset supervisor is warning that few software firms will survive the fast growth of artificial intelligence. Kamran-Studio – stock.adobe.com
Software shares have been slammed over fears that AI, notably instruments like Anthropic’s Claude Cowork, will automate software software – which helps customers full duties like writing paperwork, creating spreadsheets and managing payrolls.
An exchange-traded fund monitoring the US software sector is down more than 22% so far this 12 months. Industry leaders like Salesforce and ServiceNow are down 25% and 27%, respectively.
Evans said Polar Capital has bought nearly all of its holdings in software firms like SAP SE, ServiceNow, Adobe and HubSpot – telling Bloomberg that the fund “won’t go back to these companies.”
Investors must be “significantly underweight application software and they have to react quickly, because as the models get better, the disruption is accelerating,” Evans said.
The market rout may also harm software firms in the long run, since many staff obtain shares as half of their compensation – and managers could possibly be pressured to make up for the equity losses by shelling out more money, according to Evans.
“We don’t believe current prices reflect the terminal value uncertainty or the pressure on free cash flow,” he told Bloomberg.
Software shares have been slammed over fears that AI will automate software software. interstid – stock.adobe.com
Software corporations are dealing with heated competitors not just from AI giants, but from their own shoppers, who are dashing to develop in-house AI instruments to cut down on prices.
Evans told Bloomberg he expects only a few corporations to survive a painful reckoning forward – evaluating it to the web’s blowout influence on print media in the 2000s.
Some corporations – like SAP, a German firm that makes advanced software packages – will probably be more resilient during this market shift, Evans said.
But AI instruments are “getting dramatically more powerful,” so it’s unclear how even the most specialised software firms will fare in the long time period, he added.
The outperforming hedge fund is bullish on chipmakers, with semiconductor firms making up seven of its top 10 positions as of the end of January.
Its top holding is Jensen Huang’s Nvidia – which accounts for almost 10% of the whole portfolio.
An exchange-traded fund monitoring the US software sector is down more than 22% so far this 12 months. Nattakorn – stock.adobe.com
The fund is also optimistic on firms that make networking gears and fiber optics, and those that present power infrastructure important for power-hungry data facilities.
Evans also elevated holdings in infrastructure software firms like Cloudflare and Snowflake in January, and said he has a impartial view on cybersecurity software, which doesn’t seem to face any instant dangers from the growth of AI.
Wall Street is still debating the future of the software sector in the face of artificial intelligence.
JPMorgan Chase strategists took a more optimistic view last week, writing that software shares like Microsoft and ServiceNow may rebound following latest “extreme price action.”
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