In today’s fast-evolving global economy, software is no longer just a component of technological infrastructure, it has become the central engine of business performance, competitive advantage, and long-term enterprise value. For investors, the rise of software represents a structural shift that goes far beyond the traditional tech sector. Whether a company operates in finance, logistics, energy, consumer services, or manufacturing, software increasingly determines how swiftly it can adapt, innovate, and scale.
This article aims to explore why software investment deserves heightened attention, what market forces are driving this acceleration, and how investors can navigate the new dynamics of the digital economy with greater confidence and strategic foresight.
The Rapid Expansion of the AI-Software Market
The opportunity is enormous. According to Global Growth Insights, the global AI-software market was valued at about US$28.43 billion in 2024 and is projected to grow to US$47.7 billion by 2026, with a compound annual growth rate (CAGR) of ~29.5% toward 2034. Precedence Research, meanwhile, forecasts the AI-software market could reach US$1.46 trillion by 2034, growing at a CAGR of 21.4%.
These figures align with broader AI-spending trends as estimated by Fortune Business Insight that the total AI market (software, services, hardware) will grow at a CAGR of 29.2% between 2025 and 2032. Within that broader expansion, software commands a dominant share, reflecting how enterprises are prioritizing intelligence over brute compute. This rapid scaling of AI-software is not speculation, it is already underway, and as an investor, we see a clear runway to deploy capital where it will meaningfully compound.
Strategic Drivers of AI-Software Investment
- AI-First Business Models
SaaS (Software-as-a-Service) companies, which once offered relatively simple dashboards and subscription-based tools, are being disrupted by AI-native alternatives. These newer models deploy intelligent agents, predictive analytics, and generative systems that can operate more autonomously and deliver greater value. A recent study shows that over 100 mid-market public software companies are being squeezed and incumbents are pressured by nimble AI-native entrants on one side and tech giants on the other. Traditional seat-based pricing models are being challenged by outcome-based and agentic pricing, a shift that aligns with our thesis on long-term software value. - Generative & Agentic AI
Generative AI is no fad but it is becoming a platform. Generative AI including foundation models, model-deployment tools, and agentic frameworks will be one of the fastest-growing subsegments in the AI-software market. As discussed in the previous article, the rise of AI agents is also influencing the way real-world workflows across manufacturing, supply chains, and finance work. Although only 23% of organizations have scaled such systems, those that do achieve significantly faster transformation outcomes. This is more than feature innovation, it is a structural evolution of software platforms. - AI in Software Development
Another dimension of opportunity comes from investing in tools that help build other software. According to Grand View Research, the “AI in software development” market which includes code generation, automated testing, and AI-assisted coding was around US$674 million in 2024, and is forecasted to reach US$15.7 billion by 2033, growing at a CAGR of 42.3%. This empowers developer productivity, accelerates innovation cycles, and creates a virtuous loop: better AI helps build better AI. - Regulatory & Governance Tailwinds
As AI adoption scales, the demand for safe, governed, and compliant AI systems also grows. Regulatory divergence across geographies will impose significant complexity, and enterprises will demand platforms that embed governance, safety, and compliance as standard. Software companies that bake in trust and controllability will win, and they’re exactly where we want to position our capital.
Risk, Competition, and the Stakes for Investors
Investing in AI-software is not without its challenges. The space is becoming increasingly crowded from cloud giants like Microsoft and Google to nimble start-ups offering specialized agents. There is also a risk of commoditization, especially for companies that don’t differentiate on model architecture, governance, or domain specialization.
Another risk is business model disruption. The legacy software companies are exposed, their subscription models may not translate well to AI-native usage. Meanwhile, successful monetization of AI (especially generative and agentic AI) relies on enterprise adoption, trust, and sustained value delivery. That is why, as an investor, it is important to look for strong product-market fit, defensible technology moats, and governance-first architecture.
Also consider macro risk such as AI compute demand can create infrastructure bottlenecks. A recent academic paper projects that the population of AI agents may skyrocket, stressing global network and cloud infrastructure unless investments in distributed inference and AI-native orchestration scale accordingly.
Why This Matters Investors & Partners
For investors, allocating capital to AI-software is no longer optional, it is a strategic imperative. AI software does more than enhance efficiency; it unlocks new business models, revenue streams, and scalable value creation. It acts as the intelligence layer that connects systems, processes, and industries, amplifying impact far beyond traditional digital tools.
- Building a future-facing portfolio
AI software isn’t just about improving operations, it is about generating entirely new business models and revenue streams.
- Driving systems-level value
Software as the connective tissue across other themes, infrastructure, industrial transformation, and sustainability. Intelligence embedded in these systems amplifies impact.
- Aligning with global scale
These are companies that can scale globally, build defensible IP, and create network effects. The addressable market is not constrained by geography.
- Mitigating risk through responsible innovation
Insisting governance, regulation-readiness, and operational resilience is crucial because understanding that scaling AI responsibly is crucial to long-term value.
Investing in Intelligence, Not Just Infrastructure
To put it succinctly: the future of value creation lies not just in building physical assets, but in unlocking intelligence at scale. The AI-software will be a core driver of growth, innovation, and competitive advantage in the decades ahead.
As intelligence becomes the new infrastructure, our role as investors is not just to back the next generation of software companies, but to partner with those shaping the rules, tools, and platforms of the AI economy. Through a disciplined, forward-looking investment approach, we aim to capture outsized value not merely from what software enables today, but from what it will make possible tomorrow.
