Ai Is Splitting Software Into Winners And Losers, Citi’s Tyler Radke Says
- Citi’s Tyler Radke says AI is creating software winners and losers.
- He expects Microsoft’s revenue growth to top 20% while Adobe feels pressure as AI projects absorb corporate budgets.
- Radke, Citi’s co-head of US software equity research, told Bloomberg Television the sector looked very different earlier this year.
- At that point, a chip stock at the bottom of its sector still beat software’s top performer.
What Happened
Radke, Citi’s co-head of US software equity research, told Bloomberg Television the sector looked very different earlier this year. At that point, a chip stock at the bottom of its sector still beat software’s top performer.
Who Are the Software Winners and Losers as AI Reshapes Budgets?
In the Bloomberg interview, Radke said AI is lifting growth at Microsoft, Palantir, and Snowflake, a cloud data company.
Market Context
Microsoft anchors his case, with Office priced under $100 a month and bundling security and Copilot, its AI assistant.
In addition, Radke said 2026 capacity at those providers is sold out, making a total AI bust hard to picture.
He expects scale to decide who survives, with larger providers likely to outlast smaller rivals if capital stays costly.
Why It Matters
Citi’s Tyler Radke says AI is creating software winners and losers. He expects Microsoft’s revenue growth to top 20% while Adobe feels pressure as AI projects absorb corporate budgets.
Moreover, higher financing costs could add to that pressure. Citi’s neocloud debt thesis blames bond yields, not weak demand, for the selloff in AI cloud providers.
If financing stays costly, the split Radke describes could widen, as strategic buyers and private equity firms target pressured makers.
Details
In contrast, Adobe and smaller application vendors face pressure as information technology (IT) budgets shift to AI, he said.
Meanwhile, he says rivals charge hundreds of dollars monthly, which leaves Microsoft room to monetize further.
For context, Microsoft’s revenue grew 18% in the quarter ended June 30.
Radke added that Citi’s survey of chief information officers (CIOs) places Microsoft’s in-house AI models near the leading labs.
Is Consolidation the Next Phase for Pressured Software Makers?
Salesforce offered a fresh example on Tuesday. A filing shows it agreed to buy Braze, a customer engagement platform, for $47.50 per share in cash.
Salesforce shares rose about 20% after its last quarterly report, Radke noted.
Even so, he says, the question after half a dozen large deals is whether Salesforce can speed up organic growth.
Katie Stockton, founder of research firm Fairlead Strategies, lists wider credit spreads among three stock warning signs.
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