Say No To Trading
Public Markets Investor, Opportunistic Buying & Cost-Basis Management
Topicus's prominent software examples look weak in the AI era, making Tyler Technologies' US government software preferable. Government software has staying power, but Tyler avoids the European exposure and currency risks. The durability of Topicus's software runway and its future valuation remain uncertain. x.com x.comÂ
Tyler Technologies offers a decent risk/reward because government agencies are very unlikely to rush to replace it. x.comÂ
AI has erased engineering complexity as a SaaS moat, so software survives only with compliance or data lock-in. Tyler Technologies, Veeva and Guidewire are anchored in government, pharma and insurance rules, where leaving means a compliance audit; Veeva's revenue rose 16% while its stock fell 25%. Palantir's ontology locks in customer data. Salesforce, Workday, Adobe and ServiceNow are seat-based with neither moat, and BlackLine and nCino, though regulated, never went AI-native. x.comÂ
Tyler Technologies trades at 34x GAAP EBIT, not inexpensive for roughly 10% aggregate growth, and AI is unlikely to change its story in the next few years. Its view of AI is the most muted of any public SaaS company, perhaps rightly given slow government buyers and its ongoing cloud transition; management calls AI a tailwind, not a big one. Long run, AI could make copying its software cheaper and pressure pricing, while cautious local governments and brutal go-to-market give it time to respond. … Show more
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
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
Constellation Software and Topicus are being wrongly lumped in with AI software fears, setting them up to rerate back toward a 3% free cash flow yield once things clear. They adapt, execute and take advantage of deals, with record capital deployments, and moats in vertical market software are shifting rather than disappearing; much of software can adapt with the right culture. A post the author replies to counters that new competitors have beaten Harris and Tyler in govtech. x.com x.com x.comÂ
Constellation Software is finally at a fair valuation, making it a good time to accumulate. It has three big opportunities: new types of investments such as small stakes in public companies, adding AI to its thousands of software products at little extra cost, and buying small software companies in Asia and other less competitive regions. x.comÂ
Palantir looks exposed as AI deployment gets cheaper and more crowded, because outside government contracts it lacks domain expertise and controls no meaningful infrastructure software, relying on others such as Databricks. Amazon and Microsoft are launching forward-deployed engineering and frontier AI groups backed by deep enterprise relationships, and open-source models gaining traction should bring costs down. IT services firms such as Infosys could do really well instead. x.com x.comÂ
Vertical market software could become more valuable as AI agents need its permission, audit and human-control systems to operate safely. Municipal and hospital software already supplies those controls; more capable models increase the value of that layer rather than replace it. Constellation Software, Topicus and Sygnity stand to benefit if vendors open their systems to AI and build the controls themselves; otherwise another provider could take that role. x.comÂ
Microsoft and software stocks broadly still look expensive, because AI will get exponentially better over the next two years and the market may reset software valuations much lower. Software valuations have always been ludicrous, and heavy stock-based compensation behind many software revenues is widely ignored. Winners will emerge, but picking them is not worth trying. x.com x.comÂ
