Dan Loewenherz
Building at Opendoor, Former CTO at Coffee Meets Bagel
Buying software stocks is the way to position against AI hype, since the AI narrative has devalued them. AI looks massively overhyped and its valuations cannot prove out, but shorting is impractical with volatility premiums this high. Agreeing with @RealZoltanT that SaaS is the best long if you want to be short OpenAI and Anthropic, SaaS is set to rip. x.com x.com x.comÂ
AI is becoming a cash-generation tailwind for SaaS companies, as Snowflake shows. Falling token prices let them add AI for minimal or controlled spending, producing packaged services with controlled margins and rising revenue, a recipe for more cash and shareholder returns, which is what the market now rewards. Hardware names like TSMC and NVIDIA already fit that profile, while Alphabet, Microsoft and Meta are slowing cash generation and planning to raise share counts. x.comÂ
SaaS will have its time in the sun again, and now, while it is still hated, is the time to pick favorites and build positions. Bearish sector narratives don't last forever, and the view that all SaaS is being disrupted should ease somewhat this summer, though multiples may not return to prior levels. Some SaaS names have little moat against Anthropic and peers, but many, especially cybersecurity and Palantir, are strengthened by the agentic push. x.com x.com 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 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
Software stocks such as UiPath, HubSpot and ServiceNow are not about to be wiped out by AI, and a reported Silver Lake bid for Workday challenges that view. A seasoned tech investor willing to pay a huge sum, reportedly $50 billion, for a classic SaaS company fits poorly with the early-2026 thesis that AI would soon devalue enterprise software. The winners should become a control and automation layer linking AI agents, company data and workflows. The rally was partly short covering. x.comÂ
AI agents are starting to do for free what Snowflake and other cloud software companies charge subscriptions for, erasing their pricing power. The same AI is a revenue engine for chips, as infrastructure spending flows through Nvidia, AMD and TSMC hardware. The split shows in markets: SOXX is up 25% from its March low while WCLD fell 5% and Snowflake 8.4%. x.comÂ
These software names get stronger as AI grows, despite the early-2026 "AI will kill SaaS" sell-off. ServiceNow is becoming the control room that manages companies' AI agents. Salesforce's Agentforce brings in $1.2B a year and is tripling; Atlassian clients using Rovo spend twice as much; Adobe's business-safe Firefly earns $250M; Workday's agents bring nearly $500M. SAP and Snowflake hold the data AI needs, and Datadog monitors the extra systems AI creates, with the AI wave still early. x.com … Show more
Software is nowhere near a floor because AI has broken the assumption behind the sector's premium: very long-duration, highly recurring revenue. Competition is intensifying, new products such as Anthropic's suite far outperform incumbents like Microsoft Copilot, and AI natives move faster without legacy constraints. Accounting flatters results, with Snowflake's SBC above its CY25 free cash flow. Even at 30x GAAP earnings most names have downside, versus Alphabet at 23x and Nvidia at 14x. x.com … Show more
Snowflake and Palantir could spark a reversal in software because they benefit from AI yet sit inside a heavily shorted software ETF. Many hedge funds run long-semis, short-software-ETF trades, and because the ETF is not weighted purely by market cap, smaller names absorbed a lot of short selling and were pushed very low. Snowflake and Palantir carry high weights, so strong results from them could easily blow up the ETF's shorts and turn the sector. 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
