Jefferies analyst Brant Thill weighs in on the growing investor fear that AI will “eat” the software business and crush valuations. While infrastructure giants like Nvidia, Oracle, and Microsoft are soaring on AI demand, many application software leaders—including Salesforce, Adobe, Atlassian, and Monday.com—have been hit hard in 2025, with some down over 20% year-to-date. Thill argues the market is misunderstanding how software is built and monetized, calling current fears overblown.
He identifies beaten-down names like Intuit and Monday.com as buying opportunities, explains why application companies are lagging in Artificial Intelligence monetization compared to infrastructure providers, and shares his view on which firms could face real Artificial Intelligence disruption if they fail to adapt.
Here’s What Jefferies Says on AI Eating the Software Business
The U.S. software sector has entered a challenging phase in 2025 as investor sentiment swings heavily toward Artificial Intelligence infrastructure providers, leaving many application-focused software companies facing steep losses. Several high-profile names, including Atlassian, Salesforce (CRM), and others, have shed more than 20% of their value year-to-date.
Brant Thill of Jefferies, speaking on the recent market weakness, explained that investors are increasingly worried Artificial Intelligence will disrupt traditional software models and crush valuations. “Investors are fearing that Artificial Intelligenceis going to eat software, and the multiples are going to fall apart,” Thill said. “I think the fear is overblown. But nevertheless, we’re living through a period right now where investors just really don’t care about our group. They care about one area in tech, and that’s infrastructure for Artificial Intelligence.”
According to Thill, the beneficiaries of this trend have been companies like Nvidia, Oracle, and Microsoft—firms that provide the foundational computing power, cloud platforms, and data infrastructure needed for Artificial Intelligence deployment. “Many of the big platforms that provide infrastructure for anything Artificial Intelligence are doing well. And then there’s nothing left. Everything else has been wrecked. It has been a winner of only a few and a laundry list of many losers year to date,” he said.
The market’s current narrative assumes that Artificial Intelligence will quickly and easily replace or replicate the functionality of application-based software through simple prompts. Thill believes this is a misconception. “There’s this belief that in all categories—apps, infrastructure, security, vertical apps—Artificial Intelligence will allow you to just say, ‘Create a custom coding app for my car business,’ and it’s done. That’s simply wrong. It’s a misunderstanding of how software is built and maintained,” he explained.
This misunderstanding, however, has created a persistent valuation overhang. Multiples for companies like Adobe and Salesforce have been pressured for more than a year, and the trend is affecting a broad swath of the sector. While some companies have delivered decent earnings, few have posted blowout numbers to reverse the sentiment.
One notable casualty was Monday.com, which issued a weaker-than-expected outlook amid changes to its small-to-medium business (SMB) go-to-market strategy and a shift in its relationship with Google. The stock fell nearly 30% in a single day, a move Thill described as “overdone” and a potential buying opportunity.
The irony, Thill noted, is that back in mid-2023, application software leaders like Salesforce, ServiceNow, Workday, and Adobe were positioning generative Artificial Intelligence as a transformative force that would enhance their products and expand their addressable markets. Today, however, those same companies are underperforming.
“The application software sector has been crushed,” Thill said. “Artificial Intelligence is having the least impact today in that category because all the cloud infrastructure companies are getting money from the application companies to build this infrastructure. The application companies aren’t monetizing it yet.”
This delay in monetization is critical. Infrastructure providers such as Oracle are seeing massive growth—Oracle’s backlog has risen over 100% year-to-date—while application software companies are reporting single-digit revenue growth. Salesforce, for example, is growing 7–9%, which, while steady, does not excite growth-focused investors in today’s Artificial Intelligence-driven market.
Despite the sector’s challenges, Thill sees compelling opportunities for investors. He highlighted Intuit and Monday.com as two high-quality companies unfairly punished by the current Artificial Intelligence fears. Intuit, which fell more than 5% recently on concerns about SMB weakness, remains a strong business in his view. “We think there’s some tremendous buys in the application category that are great businesses and that are not going to get run over from Artificial Intelligence,” he said.
When asked whether some software companies might genuinely be at risk of losing market share to Artificial Intelligence, Thill acknowledged that every firm must integrate Artificial Intelligence into its offerings to remain competitive. “If they don’t layer it in, they’re going to be hurt,” he said. However, he stressed that many companies will successfully adapt, just as Oracle has transitioned from being perceived as lagging in Artificial Intelligence to becoming one of the fastest-growing players in the space.
Thill did flag certain companies where questions remain. IBM, for instance, has a strong Artificial Intelligence services business, but its ability to pivot into a software-led Artificial Intelligence model is still unproven. He also pointed to the divergent trajectories of Palantir and C3.ai in the AI race. Palantir, he said, is clearly winning, while C3.ai is losing ground based on recent performance metrics.
Adobe is another focal point for investor concern. As generative Artificial Intelligence tools like ChatGPT become more accessible, many fear that Adobe’s creative software could face competitive pressure. Thill suggested that while Artificial Intelligence will undoubtedly influence the creative space, the idea that it will entirely replace established platforms like Adobe is overly simplistic.
For now, the software sector remains in the shadow of Artificial Intelligence infrastructure hype. Investors are pouring capital into companies building the “picks and shovels” of the Artificial Intelligence revolution, while application software providers are left to prove their Artificial Intelligence strategies will translate into real revenue growth. Thill believes that over the next one to two years, some of today’s beaten-down names could emerge as significant winners once the market recognizes their Artificial Intelligence potential.
Until then, the divide between Artificial Intelligence infrastructure leaders and the broader software space is likely to remain one of the defining themes in technology investing for 2025.
Disclaimer:
This article is based on publicly available information and commentary from Jefferies analyst Brant Thill. It is intended for informational purposes only and should not be considered investment advice. Readers are advised to conduct their own research or consult a qualified financial advisor before making any investment decisions. The author and publisher are not responsible for any financial losses arising from the use of this information.