Bridgewater CIO says AI poses existential threat to software firms

Investing.com -- Bridgewater Associates said Monday that artificial intelligence poses an existential threat to legacy software companies, drawing parallels to how Amazon disrupted traditional bookstores in the 1990s.

The investment firm's co-chief investment officers Bob Prince, Greg Jensen and Karen Karniol-Tambour wrote in a client note that the latest release of Claude Code has created significant risk for major businesses, similar to the challenge Amazon posed to Barnes & Noble decades ago.

The warning comes as software stocks face intense selling pressure. The S&P 500 Software and Services Index has fallen 16.6% this year amid concerns that newly released AI models could upend traditional software companies.

Enterprise software, CRM, and creative design companies have been particularly affected. Salesforce is down 33% year-to-date, Adobe has declined 30%, ServiceNow has dropped 41%, Intuit has fallen 37.5%, and HubSpot is down 39%.

"Markets have started pricing in the risk to application software companies, and companies will either co-evolve with AI or face disruption," the Bridgewater executives wrote.

Layoffs have been rising across sectors, from big tech to financial services, with companies cutting thousands of jobs and citing cost-savings from AI deployment.

Bridgewater also warned that persistent geopolitical turmoil would continue to disrupt markets and commodities. The firm said U.S. moves in Venezuela, Greenland and Iran could accelerate cracks in the U.S.-led alliance system.

Shipping through the Strait of Hormuz, which handles roughly a fifth of global energy flows, remains muted as Iran de-escalation efforts stall. The conflict has driven commodity shortages and raised inflation concerns.

"The commodity shock will persist for some time," the note said.

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