RBC Capital Markets Forecasts AI-Driven Software Industry Transformation

RBC Capital Markets released a report stating that artificial intelligence will significantly reshape the software industry rather than cause its end. The firm predicts the emergence of a new class of large-scale AI-native companies, though it warns that some existing firms may become obsolete in the process.

Drawing a parallel to the cloud transition, the report notes that software companies often experience a decline in growth and margins before reaccelerating and emerging as stronger entities. The firm expects this pattern to repeat with AI integration.

Key projections include an increase in AI-driven mergers and acquisitions and lower barriers to entry that will drive further innovation. The report emphasizes that companies must build AI-native products, even if doing so requires cannibalizing existing core businesses. RBC Capital Markets advises investors to remain selective with stock choices and stay mindful of terminal value risks.