AI Is Finally Eating Software’s Total Market

AI can’t replace all software, and SaaS companies aren’t all going out of business this year, but that’s not the point. Software stocks are getting taken out to the woodshed because the software pie is shrinking. After years of consistent, steady growth, SaaS companies’ future prospects and revenues have become unpredictable. “The draconian view is that software will be the next print media or department stores, in terms of their prospects,” Jeffrey Favuzza from Jefferies Financial Group. This week was just the asteroid impact or the super volcano erupting. What comes next is the winter and multiyear contraction. Life will go on for the SaaS companies that adapt or are built for this new climate. However, this is the end for many software incumbents that long-term investors and private equity saw as stable investments. “I don’t think it’s realistic to think that the hundreds of players that are making aggressive bets in this area are all going to be the winners,” Jeff Blazek, Neuberger Berman’s Chief Investment Officer. “It’s probably going to be a streamlined, small handful of companies that will be able to claim the superior returns, which may bode poorly for the other players.”