The story today about Silver Lake, a premier private equity firm with over $100B in assets focused on tech, potentially looking to acquire $WDAY likely puts a floor under software sector for some time. Workday prior to today’s 18% move higher had been down 18% over the past year (8/12/25-8/12/26) vs $IGV (the software ETF) which was down 6% and the S&P up 20%. It was considered one of the names most likely to be disintermediated by AI. PE firms 1) use debt which increases risk if they are wrong, 2) the cost of longer-term debt is the highest in nearly 20 years and 3) they need to feel comfortable about terminal value given exits are typically now in 5-7 years. This is a much harder bar to clear than a typical public market investor who has daily liquidity if they change their mind or a strategic acquirer that may have other synergistic reasons to do the deal. Also the size of this deal makes the bar even harder to clear. With a closing market cap today of over $50B for Workday, if it were to occur this would rival the prior record breaking technology PE deal for Electronic Arts of ~$55B that Silver Lake was also involved in. This news follows the results from $TEAM last week, another name that investors have put in the AI disintermediation basket, which rallied 35% the next day in reaction to earnings and is still down 2% from 8/12/25-8/12/26. I continue to believe that AI native companies like Anthropic and OpenAI which I believe are now likely running at over $100B in annualized revenue run rate combined vs $29B to start the year will increasingly put under pressure: 1) point solution software companies that are not system of record, security or gaming, 2) headcount growth as AI empowers current employees and 3) IT services vendors. Every public company will need to find cost savings somewhere given their rapid ramp in AI spending if they want to make Wall Street forecasts. Having said that, these two recent events should help put a floor under the software sector as a whole and may help it to outperform between now and year-end given the massive underperformance and multiple compression seen since it peaked in October of last year.