How a 4% Portfolio Allocation to Software Outperformed the AI "Obsolescence" Panic by 36%
Weekly Update - Week 21
“The great obstacle to discovery is not ignorance... it is the illusion of
knowledge.” Daniel J. Boorstin
Before our Easter break, we devoted an entire issue of VMF’s Strategic Asset Allocation to a simple idea:
The market had become too blunt.
As AI capabilities accelerated, investors began treating large parts of the software sector as if obsolescence were already a foregone conclusion.
The market stopped distinguishing between fragile software businesses and deeply embedded enterprise platforms. If a company sold software, it was increasingly viewed as an AI loser.
That was the opportunity we identified.
And so far, the market is validating that view with force.
The daily chart below shows IGV ( IGV 0.00%↑ ) , the vehicle we added to express this thesis. Our recommendation arrived almost exactly where the selloff exhausted itself.
What initially looked like a breakdown increasingly appears to have been a classic bear trap.
More importantly, IGV has now broken decisively above the resistance level we highlighted in April.
Our Model Portfolio position is already up roughly 36%.
And remember: this was a 4% allocation.
So, this was not a footnote. It was a meaningful Model Portfolio decision made precisely when the prevailing narrative around software was at its most pessimistic.
The weekly chart gives the move even more weight.
It places the reversal inside the timeframe that actually governs our investment horizon. And on that higher-level view, the message is cleaner still: IGV has reclaimed important ground, relative strength is turning higher, and the breakout is now visible across multiple timeframes.
That is exactly the kind of confirmation we want to see.
But the most interesting validation may not come from the chart at all. It comes from an AI-powered portfolio.
This week, the Claude Portfolio account highlighted ServiceNow as one of Claude’s highest-conviction positions.
Pause there for a second.
ServiceNow is precisely the kind of company many investors initially assumed AI would threaten. Yet here we have an advanced AI model effectively making the opposite argument.
And that is the whole point.
Building intelligent models is one challenge. Deploying them inside real organizations is another.
Enterprises still need workflow management, governance, permissions, audit trails, compliance controls, data integration, and operational orchestration.
In fact, as AI spreads through the enterprise, they may need more of those systems, not less.
That was the core of our April thesis.
The market focused almost entirely on who AI might replace. It paid far less attention to who would help companies deploy, manage, govern, and monetize AI at scale.
That distinction is now becoming visible in price. The software-is-dead panic looks increasingly premature. And as the charts in this update suggest, the market may finally be beginning to agree.
Good investing!
Vasco Marques de Freitas, CFA, CMT
Disclaimer
The information provided herein is for general informational purposes only and does not constitute financial advice or a recommendation to buy, sell, or hold any investment. It is not tailored to any specific individual or investor profile. All investments involve risks, and past performance is not indicative of future results. Before making any investment decisions, it is important to consider your own financial situation and risk tolerance. We do not guarantee the accuracy, completeness, or reliability of any information provided, and we disclaim any liability for any loss or damage arising from reliance on the information herein. Readers are advised to consult with an authorized financial intermediary before making any investment decisions.
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