AI Threatens Software Sector: Fund Manager Warns Few Firms Will Survive

Polar Capital's Nick Evans, manager of a $12 billion tech fund outperforming 99% of peers over one year, predicts most application software firms will not survive AI disruption. He has sold all such holdings except Microsoft, citing AI coding tools that can replicate existing software, intensifying competition from clients and startups. The Bloomberg Software ETF is down 22% amid fears over AI tools like Anthropic's Claude. Evans expects cash flow pressures from equity dilution and M&A, with only a few firms—akin to resilient infrastructure providers like Cloudflare and Snowflake—likely to endure. He advises investors to significantly underweight application software as disruption accelerates.