"The Big Short's" Michael Burry Just Threw Cold Water on SaaS Armageddon. 3 Software Stocks He's Buying

Michael Burry has spent decades intriguing investors with his contrarian views. Leading up to the Great Recession in 2008, Burry, who at the time ran his own hedge fund called Scion Capital, bet against mortgage bonds, which eventually collapsed, yielding hundreds of millions in profits for Scion.

As one of the few to spot the housing collapse, Burry was famously portrayed by actor Christian Bale in the movie The Big Short.

Many things have changed since then. Burry closed another fund he started, Scion Asset Management, and launched his own Substack publication, giving investors a glimpse into his once-guarded ideas and how he thinks about different investments. In one of his recent posts, Burry poured cold water on the idea of software-as-a-service (SaaS) armageddon as a consequence of the rise of artificial intelligence (AI). Here are three software stocks he's buying.

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1. PayPal

PayPal (NASDAQ: PYPL) is a digital payments company that essentially serves as an alternative rail to the traditional payments system dominated by Visa and Mastercard, as well as more traditional payment methods like paper checks and money orders. It is a closed-loop system, meaning merchants and consumers have to join the network to interact with one another.

Customers can use PayPal to purchase goods online without sharing financial information and to send money to others globally. The stock was a darling during the COVID-19 pandemic, surging past $300 per share. After the latest software sell-off, triggered by concerns about (AI), the stock traded for less than $50 per share.

PayPal stock has struggled for several reasons. It has faced increasing competition, not even from the likes of AI, but from other digital payment options like Apple Pay, which lets people add debit and credit cards to their phones and tap and pay with them. Apple Pay has become particularly popular at checkout in stores. Furthermore, PayPal's 2026 outlook disappointed investors.

In a recent Substack post, Burry said he initiated a new position in PayPal, amounting to 3.5% of his portfolio. The stock is one of his favorites in the software payments sector. Burry also called the recent software sell-off a "reflexive positive feedback loop," due to declining software stock prices and changing market demand for their debt, which reflects pressure in private credit, which has a lot of exposure to software.

However, Burry does not believe these dynamics will last. He likes PayPal for its prudent stock-based compensation policy, discounted valuation, and ability to navigate the changing AI-driven landscape.

Trading at just 9.6 times forward earnings, PayPal stock remains cheap. Software companies like PayPal, with networks of hundreds of millions of users and significant scale, will be harder to displace by AI, so I think Burry's argument certainly has merit.

2. Salesforce

Burry also said he plans to initiate a position in Salesforce (NYSE: CRM). The stock has been hit hard this year, and it's down almost 30%. Salesforce has long dominated the customer relationship management (CRM) sector, a cloud system used by companies to manage their internal sales processes.

More than 150,000 companies worldwide use Salesforce, including about 90% of the Fortune 500. According to Performa, a consulting partner of Salesforce, Salesforce controls roughly 23% to 24% of the global CRM market, more than the combined market share of its four largest competitors.

Still, software bears have been concerned that AI will make building software products much faster and more ubiquitous, eroding large software moats and margins.

Salesforce also provided a disappointing revenue projection for the current year of $40.9 billion at the high end of management's range, which fell short of analyst estimates of about $41.4 billion.

Still, it's not like the company is sitting still when it comes to AI. Salesforce launched Agentforce last year, which leverages AI to automate tasks across human resources, information technology, and other key operational areas. The company also said it already had about 5,000 contracts for Agentforce, the majority of which are paid.

Although AI may very well make software easier to build, companies with large, established moats like Salesforce still have an advantage due to their resources and the customer relationships they can use to cross-sell new products and services. The stock is on sale, trading at 14 times forward earnings.

3. MSCI

Burry's announcement that he also plans to initiate a position in MSCI (NYSE: MSCI) isn't exactly the obvious software stock to buy on the dip, and certainly doesn't carry the same brand recognition as PayPal and Salesforce.

MSCI's stock is up about 6% this year and up about 14% during the past year, so it hasn't been beaten down like some others. However, if you look back five years, returns have been underwhelming.

MSCI provides tools and analytics that support institutional investors, including portfolio construction and risk management models, indexes, and access to extensive data.

These kinds of financial research companies have been hit hard, as investors grow concerned that people and companies will be able to use artificial intelligence to build similar products more cheaply and quickly.

So the fact that MSCI hasn't sold off a lot could be a good sign. In its annual report, MSCI also said it uses AI to improve how it collects and verifies data and to provide customers with enhanced insights. In fact, MSCI Chief Executive Officer Henry Fernandez said on the company's 2025 fourth-quarter earnings call that there are 120 to 140 projects across the company focused on leveraging AI to help boost the capacity of the company's current workforce.

Th stock trades at 31 times forward earnings, which isn't necessarily cheap, but it's well below the company's five-year average of 46 times earnings.

Bram Berkowitz has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, MSCI, Mastercard, PayPal, Salesforce, and Visa. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.