Software slowdown tied to AI budgets as much as 70%

A sharp 1-2 sentence LEDE (no heading) that leads with the most important concrete fact and makes the stake clear.

The SaaS sector’s growth deceleration can be traced to CIOs reallocating up to 70 % of their budgets to AI infrastructure providers such as Anthropic and OpenAI, a shift that helped drive the SaaS index down 6.5 % in 2025 while the broader market rose 17.6 % [2].

At a glance

Budget reallocation drives the slowdown

The chart of public software firms shows a steady erosion of growth rates since the 2021 peak, with Salesforce’s YoY growth slipping from 25 % to 8 % and Snowflake from 106 % to 24 % [2]. The conventional narrative blames “vibe coding” – developers using AI‑assisted tools to write code – but the timing does not line up: the slowdown began in 2022, three years before Claude Code (Anthropic) and Cursor (OpenAI) entered mainstream enterprise use in 2025 [2].

Instead, the data points to a budget squeeze. CIOs face a finite spend envelope, and AI foundation‑model providers have become a new, high‑value line item. Anthropic’s Claude Code alone generated $2.5 billion in annualized revenue, largely from enterprise coding contracts that command premium token‑based pricing [1]. That revenue stream, together with OpenAI’s expanding enterprise foothold, is siphoning dollars that would otherwise sustain traditional SaaS licences and seat‑based models.

Market reaction and valuation impact

The financial markets reflected this shift. The SaaS index’s 6.5 % decline in 2025 contrasted sharply with the S&P 500’s 17.6 % rise, creating a 24‑point performance gap that highlighted the sector’s relative weakness [2]. By early February 2026, the IGV ETF – a barometer of AI‑related equities – was down nearly 20 % year‑to‑date, underscoring investor concern that AI spending is cannibalising SaaS revenue streams [2].

Anthropic’s rapid revenue growth, from $9 billion to $30 billion ARR in just four months, illustrates the scale of the new AI spend. Its dominance in the enterprise coding market – 42‑54 % versus OpenAI’s 21 % – further cements AI’s role as a budget priority for large firms [1].

What to watch

• IGV ETF performance – a breach of the –25 % YTD level could signal heightened investor anxiety over AI‑driven budget shifts.
• Enterprise AI contract announcements – new multi‑year deals from Anthropic or OpenAI may accelerate the budget reallocation trend.
• SaaS earnings reports – any quarterly miss that coincides with rising AI spend disclosures will reinforce the budget‑competition narrative.

The emerging picture suggests that the software slowdown is less about AI replacing SaaS functionality today and more about a strategic reallocation of capital toward AI infrastructure. Whether this budget shift will translate into lasting market share gains for Anthropic and OpenAI, or simply a temporary rebalancing, remains an open question.