Software companies faced an 8.8 per cent fall in their enterprise value driven by concerns over the impact of artificial intelligence (AI), the latest Lincoln Private Market Index found.
The index found the enterprise value of US privately held companies decreased by 2.2 per cent in Q1 2026, driven primarily by a 7.8 per cent decrease for technology companies, which in turn was driven by an 8.8 per cent decrease for software companies, as well as a 1.5 per cent decrease for business services companies.
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Meanwhile, all other industries remained flat or modestly up quarter-over-quarter. The S&P 500 exhibited similar trends, with enterprise values decreasing 3.5 per cent since Q4, primarily due to a pullback in public software valuations. However, excluding the Magnificent 7 stocks, S&P 500 enterprise values grew by 0.7 per cent.
“While private company enterprise values have historically been driven by fundamental performance and near-term expectations of growth, Q1 marked a deviation from that trend for software companies,” said Steve Kaplan, professor of entrepreneurship and finance at the University of Chicago Booth School of Business.
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“Software company operating performance, in fact, remained positive on average in Q1. The decline in software valuations was entirely due to lower multiples for such businesses, reflecting market participants’ views of longer-term expectations around AI driven disruption.”
