'SaaSpocalypse' shows no signs of ending as software stocks crash

Updated on: February 05, 2026 7:49 AM
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In a client note last week, DA Davidson analyst Gil Luria called cloud-based data platform Snowflake Inc. (SNOW) "one of the few names that could break the doomsday narrative" in software stocks.

And though the company just scored a big win by signing a $200 million "co-innovation" deal with OpenAI last week, there doesn't seem to be anything that's going to break that "doomsday narrative" for the sector anytime soon.

Snowflake, which is down 24.7% so far this year, is just one of many software stocks that have plummeted in the early days of 2026. Adobe Inc. (ADBE) is down 20.1%, Salesforce, Inc. (CRM) has dropped 24.7%, Docusign, Inc. (DOCU) has plunged 31.7%, ServiceNow, Inc. (NOW) has declined 27.5% and HubSpot (HUBS) has sunk 39.2%.

And the list goes on, as the bloodbath across software stocks has earned the nickname "SaaSpocalypse" among investors on social media.

The pressure has only intensified for companies that provide software as a service (SaaS) after Anthropic released a new AI-powered plugin aimed at the legal industry that can automate contract review, NDA triage, compliance workflows, legal briefings and templated responses.

This led to shares in LegalZoom.com, Inc. (LZ) falling about 20% on Tuesday.

Although Anthropic actually released the new plugin on Friday, it wasn't until Tuesday that it caught the attention of traders, leading to a rout that caused software and service companies to lose about $300 billion in market value.

The concern, of course, is that AI companies like Anthropic are going to cause a vast disruption across many industries, potentially offering tools that are more powerful and cheaper than those currently being offered by SaaS companies.

In other words, 15 years after Marc Andreessen famously declared that "software is eating the world" because in 2011 "all of the technology required to transform industries through software finally works and can be widely delivered at global scale," the fear is that AI will now be eating software.

Prominent insiders push back on software's decline

However, despite the current market rout of software stocks, Nvidia (NVDA) founder and CEO Jensen Huang isn't buying that the sector is doomed.

"There is this notion that the software industry is in decline and will be replaced by AI," he said in an interview on Tuesday.

"You can tell because there's a whole bunch of software companies whose stock prices are under a whole lot of pressure because somehow AI is going to replace them. It is the most illogical thing in the world and time will prove itself."

Huang noted that software is a tool and the "latest breakthroughs in AI is in tool use." He expects that rather than inventing their own new tools, most generative AI companies will use the software tools that already exist.

Prominent tech analyst Dan Ives of Wedbush also tried to temper anxiety over the software industry in an interview with CNBC.

"There are clear concerns, but look at what Palantir has done," Ives said. "The use (AI) cases are being led by software." Ives also named MongoDB, Inc. (MDB) and Snowflake as other strong software companies. MongoDB is down 19.6% for the year.

Palantir Technologies Inc. (PLTR), whose stock surged about 150% in 2025, just delivered a huge fourth-quarter earnings beat on Monday.

Its US commercial revenue grew 137% year over year (YoY) in Q4 to $507 million, topping Wall Street’s estimates of $474 million. Its defense and government revenue grew 66% to $570 million, versus estimates of $528 million.

Meanwhile, for the full-year 2026, Palantir is expecting revenue in the range of $7.2 to $7.18 billion, while analysts had predicted sales of about $6.3 billion.

Nonetheless, Palantir's stock sank 11.6% on Wednesday and is down 21.5% to start the year.

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