Singapore’s private wealth community is reassessing exposure to software investments as generative artificial intelligence reshapes the technology landscape, prompting family offices and institutional allocators to shift capital toward more defensible data-driven businesses and away from traditional software-as-a-service models.
The reassessment comes amid heightened market volatility in software equities, including sharp swings in the iShares Software ETF, which fell 30 per cent over a matter of weeks before staging a 40 per cent rebound that later lost momentum. The rapid movement has been interpreted by market participants as evidence of positioning-driven trading rather than a stable revaluation of the sector’s fundamentals.
Kenneth Goh, director of private wealth management at UOB Kay Hian, said the scale of the swings reflected short-term repositioning rather than structural deterioration. He noted that the recovery was uneven, with stronger performance concentrated in larger, more established software companies that are better positioned within the artificial intelligence ecosystem.
Despite early concerns that AI could displace traditional software entirely, industry executives argue that the technology is fundamentally additive rather than substitutive. Neil Synnott, regional chief commercial officer for Asia-Pacific at IQ-EQ, said AI operates on top of existing enterprise systems and depends on underlying software infrastructure, data pipelines and workflows to function effectively.
This view is echoed across parts of the wealth management industry. William Chow, deputy group chief executive at Raffles Family Office, said emerging “agentic AI” systems are more likely to increase consumption of enterprise software rather than replace it, reinforcing demand for core platforms even as product cycles accelerate.
Investor behaviour, however, is shifting toward greater selectivity. Private wealth managers say allocations are increasingly concentrated in large-cap software firms with clearer AI integration strategies, while exposure to more commoditised segments is being reduced. Bank of Singapore’s head of investment advisory solutions, James Chye, said recent market declines have prompted some tactical re-engagement, but only within higher-quality names that demonstrate strong positioning in AI-related growth areas.
He added that broader portfolio allocations continue to favour semiconductors and AI infrastructure over software, citing stronger earnings visibility and capital expenditure tailwinds in those segments. The result is a diversified approach across the so-called AI stack, rather than a uniform sector bet.
Within private markets, fund managers are also reassessing valuation risk and liquidity conditions. Chow said secondary transactions in private credit have increased, with some investors exiting positions at discounts due to AI-related uncertainty and funding pressures. He noted that public markets currently offer greater transparency and flexibility compared with private structures.
Chye added that investors are increasingly focused on niche software segments such as observability platforms, proprietary databases and cybersecurity, while avoiding areas where AI could compress margins or lower barriers to entry. The emphasis has shifted toward identifying business models with durable data advantages and pricing resilience.
Across the industry, analysts describe a move away from treating software as a single asset class. Charu Chanana, chief investment strategist at Saxo, said investors are now distinguishing between AI beneficiaries, AI adapters and AI-vulnerable companies, depending on their ability to monetise AI, defend pricing power or withstand commoditisation risks.
Abhilash Narayan, director and investment strategist at HSBC Private Bank and Premier Wealth, said large software companies with vertically integrated platforms and proprietary data are better positioned to benefit from AI-driven change, while narrower point solutions face greater disruption risk.
The scrutiny extends into private credit markets, where software-related assets account for roughly a quarter of the US direct lending market. Industry participants say investors are increasingly evaluating borrower resilience, cash flow stability and leverage levels in response to AI-related uncertainty.
Randy Sim, group chief executive of IFS Capital, said interest in software-related debt has persisted despite recent volatility, particularly for borrowers with stable business models. Others in the market note rising demand for secondary and stressed credit opportunities, where valuation adjustments have created entry points.
However, lenders are tightening underwriting standards, with greater emphasis on cash-flow durability and business model sustainability. Market participants said that equity recoveries do not necessarily translate into credit repricing, as loan valuations remain tied to borrower performance rather than market sentiment.
Neil Synnott said growing scrutiny is leading investors to take a more hands-on approach to credit analysis, particularly in portfolios with significant exposure to technology-enabled businesses.
Despite near-term volatility, investors continue to view the sector as a source of attractive yields, though they stress that manager selection and disciplined underwriting are becoming increasingly critical as AI reshapes competitive dynamics across the software industry.
