3 Stocks to Avoid as Software Sector Stumbles

The software sector has already seen more carnage this month than the finale of Game of Thrones, and we’re still only halfway through January. While many stocks in this industry have been suffering extended drawdowns since early 2025, big software companies received even more bad news this week from ‘Claude Code’, the new agentic coding tool for Anthropic’s Claude Sonnet AI bot. Claude Code was actually launched last year, but a new update this month sent another round of pain at some legacy software stocks. Is this selloff overdone, or are software stocks staring down a prolonged bear market?

Why ‘Claude Code’ Has the Software Sector Spooked

Claude Code is sending shockwaves through the tech sector thanks to its complete, hands-off design. Unlike early AI agents that wrote snippets of code for specific tasks (i.e., bug fixing), Claude Code offers a fully autonomous command-line system. This disruptive approach allows developers to fully integrate their workflows into the AI tool for writing, testing, and debugging. Instead of the AI agent acting as a personal assistant or editor, Claude Code’s agents will oversee the entire task from start to finish, executing high-level design of entire software stacks with minimal human oversight.

A recent scenario from a Google engineer highlights why Claude Code has sent a shiver up the spines of Software as a Service (SaaS) companies. Earlier this month, Gemini API developer Jaana Dogan went viral for claiming that Claude Code recreated a year’s worth of her team’s work in just one hour. If a year’s worth of work can be reduced into a single hour, it’s a nightmare scenario for SaaS firms that earn a bulk of their revenue charging yearly licenses. Analysts at Oppenheimer noted this in their downgrade of creative design giant Adobe Inc. (NASDAQ: ADBE) earlier this week, citing that software has now flipped from an AI beneficiary to an AI victim due to advances in these tools.

3 Software Stocks to Avoid as Sector-Wide Panic Ensues

Adobe shares are down more than 25% in the last 12 months, but it isn’t the only software stock in trouble. The following three stocks all face serious headwinds from the ever-expanding role of AI in workflow productivity.

Salesforce: Agentic AI Risks Cannibalizing Key Business 

Salesforce Inc. (NYSE: CRM) is the original SaaS company, having gone public early enough to score the coveted Customer Relationship Management (CRM) ticker. Salesforce offers a complete suite of cloud-based business platforms and previously relied on substantial revenue from licensing its platform to large businesses.

But if 10 AI agents can now do the work of several hundred human reps, Salesforce will lose most of that high-margin license revenue. In another twist of fate, the company has spent more than 20 years building its complex cloud ecosystem, which modern businesses now view as cumbersome, inefficient, and expensive.

CRM shares staged a brief rally in December, breaking above the 50-day and 200-day simple moving averages (SMAs) before the news of Adobe’s downgrade and the latest Claude Code update reached the markets.

On Jan. 13, CRM dropped 7% in a single session, falling below the 50-day and 200-day SMAs once again amid a wave of selling pressure. A bearish crossover appears to be forming on the moving average convergence divergence (MACD) indicator, hinting that this selling pressure is unlikely to abate anytime soon.

DocuSign: A Middle Man at Risk of Being Cut Out

DocuSign Inc. (NASDAQ: DOCU) was a major beneficiary of the work-from-home revolution that began when COVID-19 hit U.S. shores. During the height of the pandemic, DOCU shares reached meme-stock velocity, trading over $300 per share and sending the company’s valuation higher than a Boeing 737. But like most COVID-era meme stocks, the party ended when the Fed began raising rates, and DocuSign now faces the risk of obsolescence.

DocuSign’s struggles began years ago when e-signature solutions started getting bundled into more popular platforms like Microsoft 365. Additionally, the company’s Intelligent Agreement Management (IAM) could be bypassed entirely as AI agents become more customized and clients seek to negotiate within their own enterprise software.

DOCU shares recently notched a new 52-week low and continue to face strong resistance along the 50-day SMA. Investors looking for optimism aren’t getting much from this chart; the Relative Strength Index (RSI) remains above the oversold threshold of 30, and selling volume is beginning to ramp up.

Atlassian: Potential Obsolescence From Autonomous Workflows

Atlassian Corp plc (NASDAQ: TEAM) is the Australian SaaS firm behind popular workflow tools like Jira, Confluence, Trello, Bitbucket, Loom, and (of course) Slack. If you work with different people on projects, you’ve likely used one or more of these tools in the last few years. And while Atlassian has been aggressively integrating AI into its suite of tools, it risks at least some of its platforms becoming redundant as agents like Claude Code make it easier to centrally integrate these workflows. Atlassian licenses out several standalone platforms, and the irrelevance of any one of them could have devastating effects on the company’s bottom line. 

TEAM shares were rejected at the 50-day SMA, and have now been down seven of the last 10 days, losing more than 15% in the process. A bearish MACD crossover confirms the latest leg of the downtrend, and the stock is in danger of erasing more than two years’ worth of gains if this trend continues (and unfortunately, that seems the most likely outcome).

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