A prominent technology fund manager has warned that the spread of artificial intelligence poses an existential threat to application software companies, and has backed the view with his portfolio. Nick Evans, who leads Polar Capital’s roughly $12 billion global technology fund, told Bloomberg in an interview published on February 17 that he has sold nearly all of his application software holdings.
The positions he exited include SAP, ServiceNow, Adobe and HubSpot, according to the report. Evans said current share prices do not reflect the uncertainty that AI has introduced into the sector, and that only a few companies are likely to come through the shift intact.
Why coding tools are the threat
Evans’s central concern is the rapid improvement of AI coding tools. Modern models can now build business-specific software, which could reduce the need for companies to buy expensive licensed packages. If businesses begin creating systems tailored to their own needs, the subscription and licensing model that underpins traditional software vendors would come under severe pressure.
Signs of that pressure are already visible in the market. Large software-focused funds have fallen sharply, and the shares of several well-known companies in the sector have dropped by double-digit percentages since the start of the year. Evans cautioned investors against treating the declines as a buying opportunity, arguing that the long-term value of the whole sector is now in question.
Where the money went
Evans has moved capital toward semiconductor companies. Nvidia, widely regarded as the backbone of AI infrastructure, is now the fund’s largest holding, at close to 10 percent of the portfolio, Bloomberg reported. His reasoning is that when the structure of software itself is changing, the companies that stand to gain are the makers of the chips and hardware that run AI models.
The fund has not left software entirely. It retains limited positions in a handful of companies that provide core internet and data infrastructure, which Evans says will remain important in the AI era. Reports also note that the fund kept call options on Microsoft.
A question for the sector
Polar Capital’s move raises a broader question for investors: whether AI represents a lasting threat to established software vendors or whether the current selloff is a temporary reaction. Software companies themselves argue that they are integrating AI into their products and that enterprise customers value reliability, security and support over do-it-yourself code. The outcome will become clearer over the next few years, but the episode shows that AI is already reshaping how large technology investors allocate capital.
