Steve Eisman, the investor made famous by “The Big Short,” compared the current enterprise software selloff to the financial sector during the 2008 crisis on his podcast this week.

The difference: nothing has actually broken yet.

“I’ve never seen a group that literally goes down when they report good numbers, when they report bad numbers, and then when they report any numbers,” he said.

Valuations Cut In Half

Baird software analyst Rob Oliver told Eisman the average price-to-sales multiple across his coverage has fallen from roughly 6.5x to 3.5x next-12-month revenues. For the first time in memory, the group trades at a deep discount to the S&P 500.

Salesforce (NYSE:CRM) sits around $174, down over 50% from its December 2024 all-time high near $364, trading at roughly 12 times free cash flow.

Adobe (NASDAQ:ADBE) has dropped to about 9 times free cash flow.

ServiceNow (NYSE:NOW) reported 21% Q4 revenue growth, watched the stock drop 10% on the print, and has since fallen over 60% from its January 2025 peak after UBS downgraded it last week citing AI disruption.

“Valuation has never been a reason to buy software,” Oliver said. A cheap multiple in this sector has always signaled something broken, not an opportunity. “If I called a software investor and led with valuation, they’d hang up on me.”

Bear Cases Stacking Up

Oliver walked through what he called four distinct bear cases on the group.

It costs far less to build software now thanks to AI and vibe coding.

Companies are cutting headcount, which means fewer seats to sell into. Annual price hikes that went unquestioned for decades are suddenly meeting resistance.

And the biggest fear of all: OpenAI and Anthropic may not need the incumbents at all, choosing instead to sell directly to enterprises.

Prediction Markets Pricing In The Pain

The Kalshi tech layoffs contract currently prices an 84% probability that information-sector layoffs in 2026 will exceed the 447,000 recorded in 2025.

Oracle (NYSE:ORCL) recently announced cuts that could reach 30,000 workers. Fewer employees means fewer software seats, which is the exact structural headwind Oliver described.

The Polymarket AI bubble burst contract gives a 15% chance of industry-wide collapse by year-end.

Resolution requires three of six triggers within 90 days, including Nvidia (NASDAQ:NVDA) falling 50% from its all-time high. The percentage has dropped over the last week as fears of an extended conflict in Iran have eased.

Eisman has previously warned about the dangers of private credit, and how every private equity software deal is likely underwater.

Oliver flagged vertical software companies as potentially better positioned, highlighting Tyler Technologies (NYSE:TYL) as a name sold off with the group despite serving municipal government, one of the least likely markets to face AI disruption.

But Eisman’s takeaway was blunt: “I certainly don’t want to be a hero here because it’s just like catching a falling knife.”

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