The AI narrative has officially shifted from euphoria to existential dread for the software sector.
A viral report from Citrini Research—projecting a 2028 scenario with 10.2% unemployment driven by rapid white-collar AI layoffs—has deeply unsettled global markets. This isn’t just a theoretical debate; it is actively driving one of the most aggressive capital rotations we’ve seen this cycle.
📉 THE GREAT DIVERGENCE: Investors are violently repricing the application layer versus the infrastructure layer.
- The Software Bleed: The U.S. software index is down 24% YTD, and the broader S&P 500 software and services index has plummeted >30% since its October peak.
- The Hardware Boom: Capital is flooding into the “picks and shovels.” TSMC is up 30%, while Asian memory giants Samsung and SK Hynix have doubled.
- The Thesis: As Christopher Forbes (CMC Markets) bluntly puts it: “The selloff in software makes sense as AI will force software coding to go to zero. Those in the supply chain will win – chips, data centres, permanent energy.”
⚖️ EXTINCTION VS. AUGMENTATION: Wall Street is currently torn between two extremes:
- The Bear Case: A “negative feedback loop” where rapid AI displacement leads to mortgage and private-equity defaults, stalling credit markets and the broader economy.
- The Bull Case: Veteran analysts like Ed Yardeni urge calm, arguing that the market is mispricing AI as a “Frankenstein monster” when it should be viewed as a massive productivity augmentor.
💡 ANALYST TAKEAWAY: Whether you believe the dystopian projections or view them as sensationalism, the market impact is undeniably real. As Nick Ferres (Vantage Point) advises: “Take it seriously, not literally.” The market is currently operating under the assumption that AI infrastructure is the only safe haven, completely abandoning SaaS and software. All eyes are now firmly fixed on Nvidia’s upcoming Wednesday earnings to either validate this massive hardware bet or signal that the infrastructure trade has overheated.
👇 Tech Investors: Is the 30% haircut on software stocks a massive overreaction, or the fundamental repricing of a dying business model?