Bridgewater's top investment chiefs have raised the alarm over the potential for recent advances in artificial intelligence to fundamentally disrupt established software businesses.
In a client note released on Monday, the firm compared the current AI-driven challenge to the threat Amazon posed to traditional booksellers in the 1990s. The note singled out the launch of Claude Code, saying: "With the latest release of Claude Code, an upstart competitor has created existential risk for major businesses, much as Amazon posed to Barnes & Noble."
The warning comes amid a broad pullback in software stocks. The S&P 500 Software and Services Index has fallen 16.6% so far this year, reflecting rising investor concern that newly released AI models may cannibalize incumbent application suppliers.
Bridgewater's co-CIOs - Bob Prince, Greg Jensen and Karen Karniol-Tambour - wrote that markets are beginning to price in the threat to application software firms. "Markets have started pricing in the risk to application software companies, and companies will either co-evolve with AI or face disruption," they said.
The firm noted that layoffs have increased across a range of industries, from large technology firms to financial services, with many employers citing cost savings from AI deployment as a reason for workforce reductions. Those cuts, Bridgewater suggested, are a visible manifestation of the broader structural shift underway.
Bridgewater also warned that geopolitical instability is likely to continue to unsettle markets and commodity supplies. The note pointed to U.S. actions in Venezuela, Greenland and Iran as potential accelerants of fractures in the U.S.-led alliance framework, a development the firm said could prompt faster global competition for weapons and resources.
Shipping through the Strait of Hormuz - a waterway that carries roughly a fifth of global energy flows - remains subdued as efforts to de-escalate tensions with Iran have stalled, the firm observed. That disruption has rattled markets by tightening commodity availability and has raised concerns about upward pressure on inflation.
On the outlook for the Iran-related conflict, the note cautioned that uncertainty remains high. "How the war in Iran plays out from here remains highly uncertain, but enough disruption has occurred, and the process of resuming shipments will be slow enough, that the commodity shock will persist for some time," the authors wrote.
Bridgewater drew a parallel to the 1990s book retail episode, noting that while some brick-and-mortar booksellers closed locations, others adapted by expanding online services and enhancing in-store experiences and curated offerings. The implication of that comparison is that some legacy software firms may successfully pivot, while others could be displaced.
The note frames the twin challenges of rapid AI adoption and geopolitical strain as key forces already influencing markets, corporate behavior and sectoral employment trends.