peony
Equity Investor & Researcher
Enterprise software names such as Salesforce, GitLab and Atlassian now trade at roughly replacement cost and should recover about half of what they lost, the usual pattern after a panic. Valuing them on replacement cost rather than profit makes them look different: the bulk of AI value is enterprise-facing, and entrenching systems inside enterprises takes so long that, with people talking about a singularity within two years, no one will have time to build competitors. x.com x.comÂ
Enterprise software like Salesforce, GitLab and Atlassian may now be too cheap, as the AI race shifts from model development to integrating agents into enterprises, where enterprise market share matters most. Model performance gaps may become trivial for everyday use within a year. Musk and Meta have no share here; SpaceX's $60B deal for Cursor, per the FT, is likely the first of many buyouts. Salesforce trades at 4x sales on about a $160B EV, and GitLab and Atlassian near 3x. x.comÂ
Software looks like a group that can lead the market higher, with many names from Palantir and ServiceNow to Zeta and MongoDB moving from late Stage 4 or Stage 1 into early Stage 2 uptrends. Sentiment is at an all-time low on fears that AI agents and chatbots will replace SaaS. AI will disrupt some areas, but many software businesses are using it to grow revenue, ship faster and expand operating leverage, and will thrive. The charts will separate survivors from the dead. x.com x.comÂ
Adobe, Salesforce and ServiceNow still generate massive cash flow, push deeper into AI and sit at the center of enterprise operations. Three of the biggest SaaS names remain beaten up in 2026; their valuations have been crushed, but the long-term opportunity may not have been. The market has swung way too far against them. x.comÂ
Software companies face a multi-year repricing because AI has removed the scarcity that made software valuable. For 20 years building software required engineers, letting SaaS firms charge monthly fees forever; when anyone can build a working product in a weekend with Claude, software stops being the moat. Atlassian is down 75%, HubSpot 69% and Figma 86%, and layoffs show headcount no longer scales with output. Survivors will be those with distribution, data and trust underneath. x.comÂ
Software stocks are bouncing back as investors realize companies like Microsoft and Oracle are becoming essential AI infrastructure rather than being replaced by AI. The IGV software ETF jumped about 13% last week, suggesting the worst panic selling may be over, and Bank of America sees a bottom forming. Even the hardest-hit names, Salesforce and Palo Alto Networks, are showing signs of life as investors move from fear back to quality. The sector is not completely out of the woods yet. x.comÂ
Adobe, Salesforce and ServiceNow, the supposed AI losers, offer the best long-term value in this market, per JPMorgan. The fear is that AI tools destroy incumbent software economics, but multiples already price a catastrophic scenario, whether or not the collapse happens. This is the setup in which dead stocks became the best performers of the next cycle. x.comÂ
Horizontal SaaS tools such as HubSpot, Atlassian and Intuit will be disrupted as companies build their own replacements with AI. Per @CJ0pp3l, quoting one of Constellation Software's AI leads, HubSpot, Jira, Mailchimp and Zendesk have been replaced with AI-built systems and agents, and only vertical software with strong systems of record and deep workflow integration will grow with AI. The market also sold vertical names like Constellation and Topicus, which hold deep platform data. x.comÂ
Software stocks may benefit from the AI displacement trade's complete reversal through 2026: instead of AI supposedly displacing traditional software companies, software companies could potentially displace the AI trade itself. x.comÂ
Software incumbents like monday.com and CrowdStrike should hold their ground because companies will lean on existing software to integrate AI rather than rip it out. Token shortages make AI hardly usable without top-dollar spend, so firms with no business vibe-coding will use software they already pay for, which can scale to get cheaper tokens. No CEO will risk their job, and no CTO will ask the board to scrap a costly software investment. The market won't go much higher without software. x.com … Show more
Software stocks face customers shifting budgets to AI infrastructure and cybersecurity while vendors spend more on tokens than planned. IBM said this last week and fell almost 30% in one day, and Pegasystems said the same this morning. That is good reason to be nervous holding ServiceNow into tonight's earnings, though it could surprise to the upside if it avoids the issue. Palantir is the only software name worth owning right now. x.comÂ
The death of software was greatly exaggerated: companies are building AI into their own products and making them more valuable, so major platforms like ServiceNow, Salesforce and CrowdStrike aren't going away. Smaller niche players may struggle, but the market may have been far too bearish on software, and Anthropic's IPO won't change that. From their 2026 lows, ServiceNow is up 84%, Salesforce 83% and CrowdStrike 173%. x.comÂ
