Just caught something worth thinking about in the software space right now, and the narrative everyone's pushing doesn't quite add up.

So Palantir's down 22% already this year. Adobe, Salesforce, ServiceNow -- all getting hit for 25 to 30%. The headlines are screaming the same story everywhere: AI is going to disrupt software, investors are panicking, sell everything. But here's where the logic breaks down.

These companies are actually reporting solid results. Revenue is growing, profitability is improving. Palantir just posted 70% year-over-year growth. If AI was truly the existential threat people claim, why would fundamentals be getting stronger? That doesn't track.

I think people are confusing correlation with causation. The real story is way simpler -- and honestly more important for your portfolio.

Look at what happened before the sell-off. Palantir was up more than 80% since the start of 2025, crushing the S&P 500. Its price-to-sales multiple expanded to 75, up over 20% in that same period. That's not normal, and it's not sustainable. The stock got ahead of itself. Same thing with Adobe, Salesforce, ServiceNow -- they've all had massive runs over the past 15 years, way outpacing the broader market's 400%+ gain.

Here's the thing though: just because a stock needed to come down doesn't mean it's done falling. Look at Snowflake trading at 14x sales. CrowdStrike at 23x. Shopify at 13x. Some of these companies are actually running net losses. The valuation multiples are still stretched, even after the recent pullback.

The AI disruption narrative? I think that's mostly noise. It's the convenient excuse the market used to justify a rerating. The deeper logic here is about valuation risk -- the idea that when stocks trade at extreme premiums, they eventually get marked down, even if the underlying business keeps compounding nicely.

Is there more downside ahead? Possibly. Investors seem to be getting pickier about which software companies actually deserve premium valuations. That's probably healthy. But it also means if you're looking at software right now, you need to dig into the fundamentals and multiples yourself. The broad "AI will disrupt software" narrative is too simplistic to base investment decisions on.