AI Agents Just Wiped $1 Trillion Off Software Stocks

Wall Street is back from Presidents’ Day — and walking straight into a buzzsaw.

The software-as-a-service sector just had its worst stretch in history. Salesforce and Adobe have each cratered more than 25% since January 1, and across the broader software universe, more than $1 trillion in market cap has evaporated. The culprit? A new breed of AI agents that don’t just assist human workers — they replace them.

Anthropic’s Claude Cowork and OpenAI’s latest autonomous agents can now navigate desktop environments and handle complex professional workflows with minimal human oversight. Think of it as the moment AI stopped being a “copilot” and started flying the plane. Wall Street has a name for what happens next: the SaaSpocalypse.

Here’s why that term is sticking. The entire SaaS business model is built on per-seat licensing. More employees means more software subscriptions. But if an AI agent can do the work of three analysts, you don’t need three Salesforce licenses anymore. Enterprise buyers are already running the math on “seat compression” — and the numbers don’t look kind for software companies charging $150 per user per month.

Morgan Stanley has flagged another layer of risk lurking beneath the surface. Nearly half of the $235 billion in outstanding software-sector debt is rated B- or lower. These are companies that survived on the promise of recurring revenue growth. If that growth stalls — or reverses — the credit dominoes start falling fast.

But here’s where it gets interesting for traders. While software stocks are getting hammered, the “pick-and-shovel” plays are thriving. Applied Materials surged over 8% recently on the logic that whoever wins the software wars still needs chips. The physical infrastructure powering AI — semiconductors, data centers, cooling systems — doesn’t care which agent wins. It just needs to be built.

The institutional rotation is already underway. Big money is moving out of high-multiple growth names and into defensive value and hardware. The S&P 500 may have touched 7,000 recently, but that milestone increasingly looks like a monument to concentration risk rather than broad market health.

For investors watching this play out, the SaaSpocalypse isn’t a reason to panic — it’s a signal to pay attention. The winners and losers of the AI era are being sorted right now, and the old playbook of “just buy SaaS” is getting rewritten in real time.