The corporate software sector is facing one of its toughest historical tests as artificial intelligence coding bots threaten traditional business models, but private equity leader Orlando Bravo remains firmly optimistic about the industry’s future. Bravo, whose firm Thoma Bravo oversees $170 billion in investments heavily concentrated in corporate software, contends that predictions of the software industry’s demise are vastly overstated.
Speaking on an episode of Compound Interest, Bravo addressed the widespread industry anxiety sparked by cheaper AI-generated replacements. Throughout the history of the technology sector, the software industry has faced major doubts on four separate occasions, and each period of skepticism was followed by a significant market boom, according to the private equity executive.
Dealmaking within the sector experienced a sharp freeze earlier this year following a steep decline in software stocks. Chief executive officers hesitated to sell companies at market lows, while private equity firms encountered difficulties in securing necessary debt financing. However, market activity is beginning to show signs of recovery, underscored by major transactions such as Schneider’s $23 billion acquisition of PTC and a $6 billion takeover of AI cybersecurity firm Varonis by a competitor backed by Thoma Bravo.
According to Bravo, the viability of a software company in the age of artificial intelligence depends entirely on two core factors: the level of domain expertise embedded in the product and the difficulty of replicating that expertise. He used HR-software provider Dayforce, which Thoma Bravo acquired in 2025, to illustrate the distinction between selling raw code and delivering an essential business service. Software companies sell reliability and operational guarantees rather than mere lines of programming. When a company promises to pay employees accurately and on time while assuming the liability for any payroll errors, competitors cannot simply substitute the underlying code to replicate that value.
Despite his long-term confidence in corporate software, Bravo warned of looming structural challenges for the broader private equity landscape. The anticipated initial public offerings of major artificial intelligence entities such as OpenAI and Anthropic are expected to dominate capital markets and crowd out other market participants. This concentration of attention and funds poses a difficult hurdle for the private equity sector, which currently maintains an estimated $3.8 trillion backlog of unsold companies as institutional investors pivot toward high-profile artificial intelligence giants.
