AWS CEO flags what’s next for AI and beaten-down software stocks

Core Viewpoint - The outlook for software stocks has shifted as concerns grow that artificial intelligence tools may disrupt traditional software services, leading to a decline in the sector's growth [1][2]. Group 1: Market Performance - The software sector tracked by the iShares Tech-Expanded Software Sector ETF (IGV) has fallen 22% year-to-date as of February 13 [1]. - Notable declines include Intuit (INTU) and ServiceNow (NOW) dropping more than 30%, while Salesforce (CRM), Palantir (PLTR), and Adobe (ADBE) have each decreased over 20%. Microsoft (MSFT) and Oracle (ORCL) are down more than 15% [3]. Group 2: Industry Insights - AWS CEO Matt Garman believes that the fear surrounding AI's impact on software companies is "overblown," although he acknowledges that AI will reshape the software industry [4][8]. - Garman emphasizes that AI is a disruptive force that will change how software is consumed and built, urging current software providers to innovate to avoid being disrupted [5]. Group 3: AWS Financial Performance - AWS generated $35.6 billion in revenue for the quarter, marking a 24% year-over-year increase and its fastest growth in 13 quarters. Operating income rose to $12.5 billion from $10.6 billion a year earlier [6]. - AWS accounts for about 17% of Amazon's total revenue but contributes roughly half of its total profit, supported by a 35% operating margin [7].