Software Index

State of the Market

Power is the name of the game. Power generation, power storage, and power use. Power will determine the next era of global dynamics.

At the forefront is Economic Power—tariffs being a stark example. The United States has continued to push its new tariff regime, and so far, this has been met with mixed success.

The US-UK trade deal appears to advantage the US compared to the prior regime, and the recently announced 90-day reduction in US-China tariffs returns the two nations to the negotiating table. What’s more, non-tariff agreements in the Middle East are being pushed by the US.

Economic Power takes decades to generate, wise governance to store, and a steady hand to effectively utilize. Its aggressive use, especially by the US, is shaping the new global trade regime.

However, we must also consider Energy Power—a power that has special ramifications in the age of AI.

Energy is emerging as the key bottleneck in the new global race for AI supremacy. Notably, a single AI query uses 5–10x the energy of a single Google search. Further, GPUs are more heavily utilized for AI rather than the CPUs used for traditional linear computing. These GPUs require significantly more energy for AI compute tasks and for cooling.

Increased energy needs are having cascading effects through the power life cycle. Every competitive nation is racing to invest in more power generation, more power storage, and efficient delivery systems to turn potential power into real Energy Power and, in turn, to Economic Power.

New AI realities continue to cause company adjustments. A major example is Microsoft’s recent layoff of about 3% of its workforce soon after the CEO’s comments suggesting that 20-30% of new internal code is being generated by AI. This trend will likely continue cascading through the software industry. Software multiples are also adjusting to economic and technological realities, with median multiples down 22% from the start of 2025 (from 6.0x to 4.7x NTM Revenue).

While the market continues to wait for additional economic data demonstrating the impact of the evolving tariff regime, major historical data is largely steady. April CPI came in at 2.3% (up slightly from March) and Unemployment was unchanged from March at 4.2%. Initial Q1 GDP estimates suggest shrinkage by 0.3%, likely due to higher-than-normal imports preceding expected tariffs. The Fed kept rates steady, continuing its cautious approach until future data fully reflects the impact of tariffs.

For now, Economic Power is being leveraged while Energy Power is being pursued. One may beget the other and, if we invest wisely, perhaps we will see these Powers turn to long-term Prosperity.