{"id":2578,"date":"2026-02-01T04:00:48","date_gmt":"2026-01-31T20:00:48","guid":{"rendered":"http:\/\/longzhuplatform.com\/?p=2578"},"modified":"2026-02-01T04:00:48","modified_gmt":"2026-01-31T20:00:48","slug":"ai-isnt-the-real-villain-zohos-sridhar-vembu-says-tech-stocks-sell-off-was-inevitable","status":"publish","type":"post","link":"http:\/\/longzhuplatform.com\/?p=2578","title":{"rendered":"'AI isn\u2019t the real villain': Zoho's Sridhar Vembu says tech stocks sell-off was inevitable"},"content":{"rendered":"

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Zoho founder Sridhar Vembu has poured\u00a0cold water\u00a0on the idea that artificial intelligence will \u201cdestroy\u201d the software industry, even as global tech stocks slide sharply and investors reassess sky-high valuations.\u00a0In a detailed post on X, Vembu argued that the current sell-off reflects long-standing excesses in pricing and business models rather than an AI-led apocalypse \u2014 though he acknowledged that AI will sharply accelerate competition and compress costs.\u00a0<\/p>

Vembu\u2019s comments came as the global software sector entered bear-market territory, down over 20% from recent peaks, despite several marquee firms beating earnings and revenue expectations. Shares of Microsoft, Salesforce, ServiceNow and SAP all fell steeply in recent sessions, wiping out hundreds of billions of dollars in market capitalisation and triggering a broader debate about whether AI is undermining the very companies that invested most aggressively in it.\u00a0<\/p>

Valuations, not AI, in the firing line\u00a0<\/strong><\/p>

According to Vembu, the pain in software stocks is overdue. \u201cI don\u2019t see why any mature software company should trade at 30-40 price-to-earnings multiples,\u201d he wrote, adding that valuations of 10 to 15 times earnings are more realistic in a competitive market. He also warned that earnings themselves are likely to come under pressure as customers push back against what he described as \u201cexorbitant prices\u201d.\u00a0<\/p>

Software stocks are coming down hard. I see it as massively over-valued companies coming down. But the quoted post argues “AI based code will destroy the software industry”.<\/p>

First, I don’t see why any mature software company should trade at 30-40 PE. I think 10 or 15 is where\u2026 <\/p>

\u2014 Sridhar Vembu (@svembu) January 30, 2026<\/a><\/p><\/blockquote> <\/div>

Calling out large SaaS players such as Salesforce and ServiceNow, Vembu criticised a growth model built around using \u201chigh-flying stock to acquire start-ups and then use high-pressure sales teams to upsell.\u201d Once both high multiples and elevated earnings come under strain, he said, the impact on such companies would \u201cfeel like death\u201d.\u00a0<\/p>

Crucially, Vembu rejected the idea that AI alone is to blame. \u201cI like to think it is good old-fashioned competition,\u201d he said, arguing that software markets are finally behaving like mature industries rather than perpetual growth stories.\u00a0<\/p>

The \u2018AI destroys software\u2019 narrative\u00a0<\/strong><\/p>

The post Vembu was responding to\u00a0took\u00a0a much harsher view. It described the recent market action as a watershed moment in tech history, arguing that investors have concluded AI makes traditional software business models obsolete. The argument centres on the idea that if AI can write code, automate workflows and generate applications cheaply, the per-seat, per-license pricing model that powered SaaS giants for the past decade collapses.\u00a0<\/p>

Examples cited include Klarna\u2019s decision to remove Salesforce from its tech stack and build in-house tools using AI, and the sharp declines in shares of firms such as Atlassian, Intuit, HubSpot and Zscaler \u2014 many of which have invested heavily in AI acquisitions and products. In contrast, hardware and semiconductor companies enabling AI development have continued to rally, underscoring what some analysts see as a brutal divide between AI \u201cbuilders\u201d and AI \u201cvictims\u201d.\u00a0<\/p>

Market commentators have framed the sell-off as a \u201cP\/E multiple compression crisis\u201d,\u00a0suggesting investors are no longer rewarding stable growth or solid earnings if they doubt the long-term survivability of a business model in an AI-first world.\u00a0<\/p>

AI as an accelerator, not an executioner\u00a0<\/strong><\/p>

Vembu\u2019s view is more nuanced. He agrees that AI will dramatically reduce the cost of building and running enterprise\u00a0software, but\u00a0sees that as an opportunity rather than an extinction event. \u201cMy bet is far lower cost of enterprise software,\u201d he wrote, adding that AI will accelerate competition rather than\u00a0eliminate\u00a0the need for software altogether.\u00a0<\/p>

He also pushed back against the notion that all enterprise applications will simply be built in-house at negligible cost. While possible in some cases, Vembu suggested a more likely outcome is a reshaped market where customers demand simpler,\u00a0cheaper\u00a0and more transparent software \u2014 and punish vendors that\u00a0fail to\u00a0adapt.\u00a0<\/p>

An opening for Indian IT services\u00a0<\/strong><\/p>

One of the most striking implications of Vembu\u2019s analysis is what it could mean for Indian IT services firms. As global enterprises question expensive SaaS subscriptions, Vembu believes services companies could step in to replace platforms like Salesforce, migrate customers and deliver savings of 60\u201380%.\u00a0<\/p>

\u201cThat is a huge opportunity for IT services firms,\u201d he said, framing the current turmoil as a potential transfer of value from high-margin global software vendors to cost-efficient service providers, particularly from India.\u00a0<\/p>

For Vembu, the message is clear: AI is not killing software \u2014 it is forcing it to grow up.<\/p> <\/div>