Goldman Sachs managing director Kash Rangan posits that artificial intelligence will act as a "force multiplier" for the software sector, ushering in a period of rebirth rather than obsolescence. This perspective suggests a significant shift in investor focus from AI hardware to application layers, potentially impacting valuations of public software companies and prompting scrutiny of private AI firms.

Goldman Sachs Analyst Bets AI Will Give Software Companies a 'Rebirth'

U.S. equities are poised for a notable shift in investment strategy within the technology sector, as a leading voice from Goldman Sachs champions artificial intelligence (AI) as a catalyst for a renaissance in software. Kash Rangan, a managing director at the investment bank, argues that AI will serve as a "force multiplier" for software, contrary to fears of its disruptive potential, ultimately leading to a rebirth of the sector.

The Event in Detail: AI as a Force Multiplier for Software

Rangan’s thesis suggests that the integration of AI into software will drive unprecedented growth, potentially reversing years of stagnation. He draws a parallel between AI’s current impact and the internet browser’s effect on software in the 1990s, where it expanded the industry significantly. This perspective comes as investors begin to look beyond the initial hype surrounding AI hardware to focus on the application layers where AI can deliver tangible value.

In this evolving landscape, Rangan highlights several established SaaS companies as promising investment opportunities, recommending Salesforce (CRM), Intuit (INTU), Adobe (ADBE), and ServiceNow (NOW). These firms, he suggests, are well-positioned to leverage AI to enhance software functionalities, automate complex tasks, and revitalize their offerings.

Additionally, Rangan identifies CoreWeave (CRWV) as a speculative, high-leverage bet on the AI infrastructure theme. CoreWeave, which recently debuted on NASDAQ, has seen its shares more than double since its March 2025 initial public offering. The company reported strong performance in Q2 2025, with revenue surging 207% year-over-year to $1.213 billion, marking its first quarter exceeding a billion dollars. A substantial 98% of this revenue stemmed from long-term contracts, contributing to a robust revenue backlog of $30.1 billion.

Analysis of Market Reaction and Broader Implications

Rangan’s analysis could significantly re-orient investor sentiment, directing focus and capital towards public software companies. This shift is predicated on AI’s ability to make software more intuitive and efficient, generating new monetization avenues and expanding user bases. Goldman Sachs research supports this view, with estimates suggesting generative AI technologies could boost global GDP by 7% over a decade.

While optimism surrounding AI is high, Rangan clarifies that concerns about an "AI bubble" are more pertinent to private markets than to established public software firms. Valuations for private AI startups, such as OpenAI and Anthropic, have indeed soared, with OpenAI reportedly boosting its valuation to $500 billion and Anthropic reaching $183 billion through recent funding rounds. These figures underscore intense investor appetite for early-stage AI plays, contrasted with the more mature and financially established public software sector.

However, CoreWeave presents a unique blend of hyper-growth and financial risk. The company has aggressively pursued debt financing to fuel its expansion, with total capital commitments now exceeding $25 billion, including a $2.6 billion delayed draw term loan facility in July 2025. This strategy has resulted in a significant debt load of $11 billion against $1.1 billion in cash, incurring high interest expenses, projected at approximately $1 billion annually. Despite its rapid revenue growth, CoreWeave’s valuation has seen some normalization, compressing from over 35x forward sales at IPO to approximately 12x as of September 2025, though this remains elevated compared to the cloud infrastructure sector median of roughly 3x EV/sales. Risks for CoreWeave include customer concentration, with one client accounting for 72% of sales, and the inherent challenges associated with heavy leverage tied to aggressive capital expenditure plans.

Expert Commentary

"AI will be a 'force multiplier' for software, not a destroyer," stated Kash Rangan, emphasizing his belief that AI will lead to a software renaissance. His perspective is echoed by Goldman Sachs economists Joseph Briggs and Devesh Kodnani, who highlight how AI breaks down barriers between humans and machines, fostering innovation in software. Marco Argenti, Goldman Sachs' chief information officer, foresees AI evolving into hybrid workers and expert models by 2025, transforming software into intelligent partners.

Looking Ahead

Investors will be closely monitoring the adoption rates of AI-driven software solutions, with Goldman Sachs projecting accelerated AI investments exceeding 2024 expectations. While the "rebirth" narrative positions software at the forefront of the AI revolution, potential risks remain. Goldman Sachs analysts have previously warned of an "inevitable slowdown" in AI spending, which could pressure stock valuations, potentially leading to a market dip if major tech firms reduce capital expenditures. For companies like CoreWeave, long-term sustainability will depend on improvements in its capital structure and diversification of its customer base. The interplay between innovation, market sentiment, and prudent risk assessment will ultimately define the tech economy's trajectory in the coming years.