Thoma Bravo co-founder Orlando Bravo said Tuesday that artificial intelligence will disrupt software companies faster and that some of the hit to valuations is “very justified.”
“There are so many software companies in the public markets that will be disrupted by AI,” he told CNBC’s Leslie Picker at the Thoma Bravo investor conference in Miami. “Those companies will be destroyed anyway.”
Bravo did not name any companies he thought deserved lower valuations or were at risk of disruption.
Thoma Bravo is a software-focused investment firm founded in 2008. As of December, the firm managed more than $183 billion in assets across 77 companies.
Software stocks have taken a big hit as AI modeling companies release tools that threaten to replace these services at a much lower cost. iShares Enhanced Technology Software Sector ETF (IGV) tracks the industry and is down about 28% from its all-time high in September.
But Bravo said some software names had been “unfairly” hurt by the divestiture, and that there were “tremendous companies that will actually be big winners in the agent era.”
“These companies have been severely punished when they should not have been,” he added.
Bravo did not name the companies.
Apollo Global Management President John Zito recently criticized private equity firms for their “arrogance” in evaluating software, The Wall Street Journal reported Sunday.
Zito specifically highlighted Bravo’s acquisition of software company Medallia in 2021 for $6.4 billion.
Bravo told CNBC that the company overestimated Medallia’s growth rate in the acquisition.
“We made a mistake and it cost us a lot of money,” Bravo said.
