European Software Selloff Creates Buying Opportunities Amid AI Shift, Goldman Sachs Says

A broad selloff in European software stocks, fueled by the rapid emergence of agentic AI, has created selective investment opportunities as the market re-evaluates the value of established companies, according to a Goldman Sachs client note.

Market Correction Driven by AI Disruption

Goldman Sachs noted that its European software coverage has seen share prices fall by an average of approximately 37% from their 52-week highs. According to analyst Mohammed Moawalla, this decline reflects investor uncertainty as they weigh the offerings of incumbent firms against "agile, well-funded AI challengers, particularly from the US."

The report states that agentic AI "is reshaping the enterprise software stack, changing customer priorities, and shifting investment budgets at a pace faster than any previous technology transition." This rapid pace of change has led to a significant de-rating across the sector.

A Shift in Value, Not Full Displacement

Rather than predicting a complete disruption of established software leaders, the bank anticipates a redistribution of value across the industry. Goldman Sachs expects incumbents will likely maintain control over their core applications and "mission-critical, regulated systems of record."

However, the report suggests that "incremental value will increasingly accrue to the orchestration, agentic, and contextual layers built on top of these systems." This implies that the market's fear of total displacement may be overstated, creating opportunities in companies that can successfully integrate AI.

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The Path to Recovery

Goldman Sachs highlights a fundamental shift in business models, with software monetization moving away from traditional seat-based licensing. The bank sees a transition toward hybrid structures that include consumption- and outcome-based pricing.

Looking ahead, the firm believes several factors will be key for a market recovery:

• New Monetization Models: Companies will need to demonstrate clear pathways to monetize their AI products.
• Product Uptake: The market will watch for tangible evidence of customer adoption of new AI-integrated features.
• Cost Optimization: A greater focus will be placed on the cost dynamics of using large language models as companies seek to balance AI spending with return on investment (ROI).

Drawing parallels with previous technology disruption cycles, the analyst concluded that it will likely take "a multi-year period for stocks to re-rate from trough multiples" as these factors become clearer to investors.