Keep pulling the thread on Rob Oliver.
For the first time in its history, the software sector is trading at a significant discount to the S&P 500.
Buy-side investors are waiting to see how software company retention rates perform over the next two quarters before considering reinvesting in the sector.
Investor fears about AI have caused the software sector to be "obliterated" over the last year.
ServiceNow's stock fell 10% after the company reported strong fourth-quarter financial results.
The cost of creating software has decreased significantly due to the capabilities of AI.
A key bear case for enterprise software is that large companies may use AI to develop bespoke internal solutions, reducing their need for commercial software vendors.
A major concern for the software industry is that companies like OpenAI and Anthropic could bypass traditional software vendors and sell their AI solutions directly to enterprises.
The average price-to-sales multiple for software companies on Rob Oliver's coverage list has been cut in half, from approximately 6.5x to 3.5x next-12-months revenue.
Direct lending funds have an estimated 25% to 30% of their portfolios invested in software companies that were taken private by private equity firms between 2018 and 2022.
Tyler Technologies is the leading provider of local municipal software in the United States and has a market capitalization of $14.5 billion.
ServiceNow reported 21% revenue growth in its fourth-quarter earnings.
The negative investor sentiment towards the software sector began with the emergence of OpenAI and Anthropic.