Schroders says AI fears overdone in software

Binaya Dahal

Journalist

9 June 2026

Schroders’ Claire Smith says investors’ concerns over artificial intelligence disrupting software have been excessive, noting many businesses remain far more resilient than market sentiment suggests.

As AI capabilities have advanced, clients are increasingly focused on whether software applications can be replaced by AI-native alternatives, triggering sharp valuation swings across parts of the sector.

Smith, head of investment directors for public and private markets at the $1.1tn asset manager, cautioned investors are adopting a “guilty until proven innocent” approach toward software companies, despite significant differences in their exposure to AI upheaval.

“There’s been a view that AI is killing software,” she said. “AI is absolutely reshaping parts of the software market, but the idea that every software company is suddenly at risk simply isn’t how investors should be thinking about it.”

Smith added that Schroders’ analysis suggests the number of businesses facing material disruption remains relatively small.

The asset manager conducted an AI threat assessment across its software holdings and found only around 2% of companies in its semi-liquid private equity fund fell into a high-risk category.

“When you look underneath the surface, many of these businesses still have highly sticky customer bases, proprietary data, and critical functionality,” Smith said.

She also said software providers operating in specialised and regulated industries remain difficult to displace because customers continue to prioritise reliability, compliance, and security.

“You’re not going to vibe-code your way around payroll systems handling confidential patient data,” Smith said. “Businesses still need reliability, compliance, and security. AI is not eliminating that.”

While AI disruption remains a risk for some companies, she said the technology is also creating attractive investment opportunities, particularly among businesses supporting the infrastructure behind AI adoption.

“We prefer businesses that are benefiting from the growth in AI infrastructure, rather than trying to predict which individual AI applications will ultimately win,” Smith said.

Beyond technology, Smith said many attractive private equity opportunities continue to come from niche businesses with recurring revenues and strong customer relationships.

“Sometimes the best investments are the boring ones,” she said. “We look for companies with services that businesses simply cannot switch off during difficult economic periods.”