<div id="readability-page-1"><div id="ArticleBody-InlineImage-108254284"><div><div>Marc Benioff, CEO of Salesforce, speaking on Squawk on the Street at the World Economic Forum in Davos, Switzerland on Jan. 20th, 2026.Oscar Molina | CNBC</div></div></div><div>Cloud software stocks have started this year where they left off in 2025: selloff mode. The continued downward spiral is setting the stage for a flurry of acquisitions, investors told CNBC. The WisdomTree Cloud Computing Fund, which tracks cloud software, has dropped more than 8% so far this year, while the Nasdaq is slightly up. Leading software names like Salesforce, ServiceNow and Adobe are down more than 14% after badly underperforming the market a year ago. The overriding concern is that artificial intelligence will eventually displace key pieces of the enterprise stack, as IT buyers turn to AI agents to handle tasks currently handled by software vendors, both large and small. Those fears were amplified last week when Anthropic's Claude launched an AI agent tool named Cowork that is aimed at the enterprise customer. A senior investor at a large private equity fund who asked not to be named in order to speak candidly on the subject said the disruption in software is happening today and will force several mid-sized software companies to seek financing options, potentially spurring acquisitions by private equity. </div><div>Orlando Bravo, co-founder of software-focused buyout firm Thoma Bravo, is looking to buy the dip, and sees value in companies that are building their own agentic solutions to work with their existing systems.&#34;We're seeing just incredible buying opportunities right now,&#34; Bravo told CNBC's Sara Eisen in Davos on Wednesday. He said his firm is doing deals and &#34;will be a lot more active.&#34;While investors like Bravo remain bullish on software in an AI-dominated world, analyst Jackson Ader at KeyBanc sees real vulnerabilities. He conducted an analysis of the major threats facing software in August, and said then that seat-based application companies like Monday.com, Asana and Sprout Social are the most exposed. All three stocks have seen double-digit drops in 2026.In that same note to clients, Bader said those companies aren't tied to an anchor system of record like enterprise resource planning (ERP) or customer relationship management (CRM), and have yet to become multi-product platforms. Representatives from Monday, Asana and Sprout didn't respond to requests for comment. Even companies with a wider breadth of products and more established enterprise footprint are facing significant market skepticism. Salesforce CEO Marc Benioff has spent months defending his company and trying to reassure investors that it's well-positioned in AI. In Davos, Benioff told Eisen that the company's latest quarter was &#34;the best quarter we've ever had in our careers,&#34; and that &#34;we're one of the largest cash-producing companies in the world.&#34;&#34;But it's not enough,&#34; Benioff said, referring to the market action. &#34;Because if you don't produce a large language model you're evidently not in fashion right now.&#34;</div><div>ServiceNow is responding to the pressure by joining the potential competition. On Wednesday, the company announced a deal with OpenAI to use its models to offer AI agents to business customers.The news didn't ease concerns. ServiceNow shares dropped for six consecutive trading days before rising on Thursday, and are down 17% in January. HubSpot, Atlassian and Braze are having an even worse start to the year, with shares of each down more than 20%. Rishi Jaluria, an analyst at at RBC Capital Markets, told CNBC that the recent pullback in software stocks could force certain companies to &#34;explore strategic alternatives,&#34; and that any new deals that don't have a compelling AI angle won't gain much traction with investors. In a note published in late November, Jaluria highlighted Asana, Box and DocuSign as potential acquisition targets in software. The companies didn't respond to requests for comment. With tech earnings season kicking into high gear next week, Wall Street will start to get a clearer picture of where particular companies stand in adopting AI or getting swallowed by it. Luria said one of the crucial questions is how quickly AI agents like Claude's Cowork go beyond developing new code and actually automate different parts of the software lifecycle. That timeline will be critical in understanding the reality of the AI threat and how soon cloud software companies might feel the pain. — CNBC's Noah Broder contributed to this report.WATCH: AI challenging software incumbents </div>AI coding enters the mainstream</div>

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The software sector is experiencing a selloff, with major companies like Salesforce and Adobe down over 14% amid fears of AI displacement. Investors anticipate a surge in acquisitions as mid-sized firms seek financing. Thoma Bravo's Orlando Bravo sees buying opportunities, while analysts warn of vulnerabilities in companies lacking strong enterprise ties. ServiceNow's recent partnership with OpenAI has not alleviated market concerns, as shares continue to decline. The upcoming tech earnings season will provide insights into how companies are adapting to AI challenges.

- Cloud software stocks are experiencing a selloff, with the WisdomTree Cloud Computing Fund down over 8% this year.  
- Concerns about artificial intelligence potentially displacing traditional software have intensified, leading to speculation around acquisitions as mid-sized companies seek financing.  
- Salesforce and other major software firms are facing scrutiny over their market positions, as analysts emphasize the need for AI integration to regain investor confidence.

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Software selloff sparked by AI sets stage for potential big year of M&A, investors say