It has been a tough period for ASX growth shares, particularly in the software space.
A big part of that has been the market's growing focus on artificial intelligence (AI). Investors are trying to work out which businesses will benefit, which may be disrupted, and how quickly those changes could play out.
That uncertainty has weighed heavily on sentiment.
In many cases, it has led to sharp valuation resets, with several software-focused companies now down more than 50% from their 52-week highs.
Here are three that I think are worth revisiting.
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Life360 Inc. (ASX: 360)
Life360 has seen a significant pullback and is down 66% from its high. This is despite continuing to expand its platform.
The company operates a location-based app that focuses on safety and connectivity for families. Over time, it has been shifting toward a subscription model, which can create more predictable revenue.
What stands out to me is how the AI narrative has affected sentiment. While Life360 is not a traditional enterprise software company, it still sits within the broader tech ecosystem. As investors reassess which digital platforms will benefit from AI and which could face pressure, companies like Life360 have been caught in that shift.
At the same time, the business continues to grow its user base and monetisation.
If it can keep executing on that transition to subscriptions and building its moat, I think there is a case that the share price weakness has created a compelling buying opportunity.
Xero Ltd (ASX: XRO)
Xero has been one of the more obvious examples of this trend. As a cloud-based accounting software provider, it sits directly in the line of fire when it comes to AI disruption concerns.
Investors are asking valid questions. Could AI automate parts of the accounting process? Could it reduce the need for traditional software platforms? And how will companies like Xero adapt?
Those questions have contributed to the de-rating. But I think it is also important to consider the other side.
Xero is deeply embedded in the operations of small and medium-sized businesses. It is not just a tool, it is part of how those businesses run day to day.
That creates switching costs and supports recurring revenue.
Over time, I think the more likely outcome is that AI becomes an enhancement rather than a replacement, but that is something the market is still trying to price in.
WiseTech Global Ltd (ASX: WTC)
WiseTech has also been caught up in the same shift. The company develops logistics software that is used across global supply chains, and like Xero, it has a deeply embedded product.
But again, AI disruption fears have weighed on sentiment. Investors are questioning how emerging technologies might change the competitive landscape, particularly in software-heavy businesses. That has contributed to a significant pullback in the share price.
At the same time, the underlying need for logistics software has not changed. Global trade remains complex, and managing supply chains requires increasingly sophisticated systems.
For me, that suggests the long-term demand is still there, even if the market is reassessing how that demand will be met.
Foolish takeaway
The selloff in software shares this year has not happened in a vacuum. AI disruption fears have played a major role, leading investors to reassess valuations across the sector.
That has created sharp declines in companies like Life360, Xero, and WiseTech.
The key question now is whether those concerns are overstated or justified. If these businesses can adapt and incorporate new technologies into their platforms, the current weakness could prove to be an incredible opportunity.
