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SAP drives fear in Software

January 29, 2026


The software index is down over 6% at the moment.  News from software titan, SAP, is bringing down all the software stocks today.  SAP (down -17%) is a software company that sells applications to large companies.  Think of the accounting system inside Bank of America.  Or the inventory tracking system inside General Motors.  That’s the type of software they sell. 


On their earnings call last night, the SAP CFO said the backlog of new orders grew slower than expected – only 25% growth, versus 27-29% in recent quarters.  Management attributed this to larger deal sizes (which take longer to close) and geopolitical tensions. 


HOWEVER, the market fears that the real reason for the slight slowdown is the threat of AI replacing legacy software applications.  


And that’s a problem for all software companies.  So that fear is spreading to the whole sector – Microsoft, ServiceNow, Oracle, Palantir, SAP (of course), Salesforce, Workday, etc.   They’re all down 5-12% at the moment, depending on their perceived level of risk to AI.


Microsoft and ServiceNow reported earnings last night, and they were both good overall.  But that’s not saving them from the wave of AI-related fear sweeping across software. 


At the moment, this move is purely fear driven.  Microsoft and ServiceNow street estimates are both RISING this morning.  So the fundamentals are still strong.  But the fear is crushing the valuations.  Will it translate eventually into earnings pressure?  That’s the fear.  The slowdown in SAP’s backlog is being taken as a canary in the coal mine by some investors.

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