Software Stocks Are Divided as AI Creates a Deep Rift Between ‘Haves’ and ‘Have Nots’

The software industry is divided into two distinct categories: companies providing infrastructure for artificial intelligence (AI) and traditional application software facing pricing challenges. Infrastructure-focused firms are gaining market share, while legacy SaaS providers struggle with AI-driven efficiency gains. Oracle, once a stagnant database company, is now a key player in multi-cloud infrastructure and AI workloads.

Its transition to cloud services has given it pricing power and cash flow. However, high-flying SaaS companies like Salesforce are showing signs of exhaustion as AI agents reduce the need for human workforce. The software ETF, iShares Expanded Tech-Software Sector ETF (IGV), now presents a mixed bag of opportunities and risks, requiring investors to carefully assess which companies are on the right side of the AI shift.