Despite a volatile start to the year, the US software sector is poised for growth, driven by rapid AI adoption and advancements in automation. According to BofA analysts, the sector remains attractive as it enters the third major tech cycle, underpinned by Agentic AI and transformative trends in enterprise software.

Key Trends Shaping the US Software Sector in 2025

1. Enterprise AI Pilots Move to Production

   • AI adoption is accelerating as companies transition from pilot projects to full-scale implementation.
   • This shift will drive increased investment in software solutions enabling enterprise-level AI capabilities, unlocking new revenue streams for software providers.

2. Quantitative AI Commentary in Earnings

   • In the first half of 2025, companies provided qualitative insights into AI adoption.
   • By the second half, they are expected to offer quantitative data on incremental revenue generated by AI, laying the groundwork for significant monetization in 2026-27.

3. Prioritization of AI Software Spend

   • Budgets for AI initiatives are cannibalizing lower-priority IT projects, reflecting a strategic pivot toward high-return investments.
   • This trend emphasizes the criticality of AI in driving business efficiency and competitive advantage.

4. Momentum in Agentic AI and SLM Development

   • Agentic AI, which can perform tasks autonomously, and Small Language Models (SLMs) are gaining traction.
   • Rising demand for automation and operational efficiency positions these technologies as pivotal to the sector's growth trajectory.

5. DevSecOps Productivity and Low-Code/No-Code Proliferation

   • The adoption of low-code and no-code platforms is democratizing software development, enabling diverse teams to handle IT, security, and operational tasks.
   • This evolution enhances productivity and reduces dependencies on traditional IT workflows.

Opportunities for Investors

The software sector's transition to Agentic AI and its alignment with enterprise needs offer substantial growth opportunities:

• AI Monetization: Incremental revenue from AI-driven solutions is set to transform the financial outlook of software companies.
• Automation and Efficiency: Investments in Agentic AI and low-code platforms will attract businesses seeking cost-saving solutions.
• Strategic Positioning: Software providers at the forefront of these trends will command significant market share in the coming years.

For actionable insights into sector performance, check out the ETF Sector Weighting API to track software-focused ETFs and their allocations.

Conclusion

As the AI revolution unfolds, the US software sector is uniquely positioned to capitalize on these transformative trends. From Agentic AI to low-code platforms, software companies are not just adapting but redefining their value propositions. For investors, 2025 promises a fertile landscape of opportunities driven by innovation and strategic realignment.