Recent weeks have been a sobering reminder that the world’s risks are not only technological. The escalation of conflict involving the US, Israel and Iran, threats to close the Strait of Hormuz and a sharp move higher in oil prices have all contributed to a more fragile, uncertain backdrop.
Yet beneath this uncertainty, another powerful force is reshaping the investment landscape: the rapid, and at times brutal, disruption caused by artificial intelligence (AI).
In just over three months, the S&P 500 Software Index has halved from its late 2025 highs, while the Australian S&P/ASX 200 Information Technology Index has fallen about 40%. Even Microsoft, considered a portfolio stalwart and leader in AI, has entered a technical bear market. The speed and scale of wealth destruction among once-high-quality companies is striking, highlighting how AI is no longer just about infrastructure and chipmakers. It is fundamentally changing business models across the economy.
From moats to bridges
One of the main drivers of this disruption is the rise of agentic AI, which can plan and execute multi-step tasks, moving beyond simple reasoning to task execution. Anthropic’s “Claude for financial services” broke the "behind the wall" defense allowing firms to apply AI to their most sensitive data without it leaving their environment, weakening the ability of external software providers to charge for "workflow layers". Google’s Project Genie enables users to create interactive 3D worlds from text or images, putting pressure on gaming platforms that previously charged for complex physics and rendering. Claude Cowork, launched in January 2026, works autonomously across a user’s local files and cloud apps, challenging the value, for example, traditional accounting and productivity platforms can capture.
In essence, productivity is no longer locked behind high-margin, specialised software silos; it is spreading more broadly across, and within the corporate landscape.
Destruction and creation
At first glance, the rapid destruction of value in the software sector seems to suggest a negative backdrop for equities. However, history shows that major waves of technological adoption do not just destroy old value; they lay the groundwork for a broader and more robust foundation for future returns. In this light, the recent sell-off in high-profile software names can be viewed as a reset rather than a systemic problem. By clearing outstretched valuations and weakening entrenched moats, the door is ajar for AI-enabled productivity gains to flow to a wider universe of companies, sectors, and geographies, where the diffusion of technology presents both challenges and opportunities for innovation.
At our upcoming Investment Symposium, Scott Haslem, Chief Investment Officer, will open with a macro and market update on how AI, policy settings and rising geopolitical risks are shaping the outlook for global growth and asset allocation.
This will be followed by a fireside discussion hosted by Martin Randall, Head of Private Markets at LGT Wealth Management, with speakers from Blackbird, one of Australia’s most successful technology focused venture capital firms, and Lightspeed, a leading US based venture capital manager in AI and high growth technology.
These managers are among the foremost Australian and global experts on investing in AI enabled businesses, and Lightspeed is joining us in Australia exclusively for this series of LGT Wealth Management events. They along with our panel of multi-asset class managers from Janus Henderson, HarbourVest, Blackrock, Blackstone and Antipodes will discuss how investors can position portfolios for resilience and long-term growth in an ever-changing investment landscape.
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