Apollo's Sambur says software's AI troubles will persist, noting the 'very large unknowns'

David Sambur, co-head of private equity at Apollo Global Management, expressed concerns on CNBC regarding the ongoing volatility in software stocks attributed to fears surrounding artificial intelligence (AI). He emphasized that the situation is still in its early stages, suggesting that the turmoil is far from over. Despite a recent uptick in the IGV Software ETF, which saw a 3% increase in March, the ETF remains down 20% for the year. Sambur pointed out that software companies are under intense scrutiny, facing pivotal questions related to their revenue models, gross margins, competitive pressures from AI innovators like Anthropic and OpenAI, and their overall valuations. While acknowledging the recent market rebound, Sambur remains skeptical, stating that the fundamental concerns—such as the implications of AI on competition—are unlikely to change. He remarked that the pace of AI-driven disruption in the software sector is unprecedented in his career, indicating a historic shift that is rapidly altering the landscape. Sambur highlighted the industry's struggle to predict how software dynamics will evolve over the next one to five years due to the continually transforming nature of technology. "No one knows," he admitted, adding that investors are now recalibrating valuations to accommodate significant uncertainties. Amid these challenges, there are emerging investment opportunities, as many software firms, including Intuit, Hubspot, and Salesforce, have announced share buyback programs. However, RBC Capital's Rishi Jaluria noted that these buyback announcements are largely overshadowed by prevailing AI anxieties. He raised the question of whether such buybacks indicate a bullish market sentiment or signal companies conceding defeat. Jaluria cautioned that extensive buybacks could limit the availability of funds for future mergers and acquisitions, potentially stifling innovation in the sector.