For years, investors tolerated software companies using stock to compensate employees while share prices climbed. Software companies could afford generous equity packages when valuations soared and stock options seemed like free money. But the recent market rout has changed everything.

Now, with software stocks getting pummeled amid AI fears, investors are questioning whether these companies can sustain their generous stock-based compensation. When share prices were rising, equity grants looked like a win-win - employees got upside potential and companies conserved cash. The math worked when valuations were high and growth seemed limitless.

This shift in sentiment marks a dramatic change for an industry that has relied on stock compensation as a core recruiting and retention tool. As software valuations fall, the cost of these equity packages becomes more apparent on balance sheets. Companies that once used stock freely to attract talent now face pressure to cut back or find alternative compensation methods. The practice that seemed so clever during boom times now looks like a liability in a downturn.