Software selloff sparked by AI sets stage for potential big year of M&A, investors say

Core Viewpoint - The cloud software sector is experiencing a significant selloff, leading to potential acquisition opportunities as investors express concerns about the impact of artificial intelligence on traditional software vendors [1][2][3]. Group 1: Market Performance - The WisdomTree Cloud Computing Fund has declined over 8% in 2026, while major software companies like Salesforce, ServiceNow, and Adobe have seen drops exceeding 14% [2]. - ServiceNow shares have fallen 17% in January, with HubSpot, Atlassian, and Braze experiencing declines of over 20% [8]. Group 2: Investor Sentiment - Investors are viewing the current market conditions as presenting "incredible buying opportunities," with firms like Thoma Bravo actively seeking to acquire undervalued companies [4][5]. - Analyst Jackson Ader identifies vulnerabilities in seat-based application companies such as Monday.com, Asana, and Sprout Social, which have seen double-digit drops in 2026 [5][6]. Group 3: AI Impact - Concerns are rising that AI could displace key components of the enterprise software stack, as companies begin to adopt AI agents for tasks traditionally handled by software vendors [3]. - Salesforce CEO Marc Benioff emphasizes the company's strong cash position but acknowledges the market's focus on large language models as a critical factor for investor confidence [7]. Group 4: Strategic Alternatives - Analysts suggest that the recent downturn may compel some software companies to explore strategic alternatives, particularly if they lack a compelling AI angle [9][10]. - Potential acquisition targets identified include Asana, Box, and DocuSign, as companies prepare for the upcoming tech earnings season [10].