According to Woofun AI, Citigroup co-head Tyler Radke has assessed that artificial intelligence is dividing the software industry into winners and losers.
Microsoft (MSFT.US) offers Office software at a monthly subscription below $100, with Copilot and security features integrated, giving it profitability compared to competitors priced at several hundred dollars, and its quarterly revenue for the period ending June 30 grew by 18%.
Woofun AI data shows that a Citigroup survey of chief information officers indicates Microsoft's proprietary AI models have reached industry-leading levels, driving growth for Microsoft, Palantir (PLTR.US), and Snowflake (SNOW.US); conversely, Adobe (ADBE.US) is under pressure as corporate budgets shift toward AI projects.
Earlier this year, chip stocks performed better than the best software stocks, but the landscape has now reversed.
On Tuesday, Salesforce (CRM.US) announced the acquisition of Braze (BRZE.US) for $47.50 per share in cash, following a more than 20% rise in Salesforce's stock price driven by its earnings report. However, after completing six major acquisitions, organic growth has become critical, and high financing costs are adding pressure.
Citigroup analysis points out that the decline in stock prices of AI cloud service providers in the new cloud computing sector stems from rising bond yields rather than weak demand. Production capacity for 2026 has already been fully booked, and the risk of an industry collapse is low. Scale will determine survival, with larger enterprises holding greater advantages.
Fairlead Strategies founder Katie Stockton listed wider credit spreads as one of the three major risk signals for the stock market. If financing costs remain persistently high, the divergence may intensify, and strategic investors and private equity firms will target pressured companies for acquisitions.
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