Jared Sleeper
Partner & Head of Software at Avenir, Startup Investing
Little apps will be dirt cheap to build and run, arguably already are, making SaaS vendors easier to replace. The existential threat is greater than six months ago, and from a technical perspective the SaaS bear case is running ahead of schedule. Vendors that adapt have a massive opportunity, and some companies may be safe. x.com x.com x.comÂ
AI advances now let simple SaaS apps be built in one shot, materially strengthening the bear case. WCLD's 72% six-month gain is by far its biggest percentage run since the pandemic. App vendors still lack a way to drive real AI acceleration and need to rework their business models, including consumption pricing. The next year will test whether some find their footing; most lack the addressable inference spend needed for a viable path today, though their lack of progress is not yet dispositive. x.com x.comÂ
Okta, Salesforce and Atlassian look insanely expensive at nine times forward revenue against roughly 10% year-over-year growth. Many SaaS firms also have high sales and marketing costs. A commenter flags inference spending, which SaaS investors worry could compress margins; if free cash flow, growth, retention or gross margins weaken, their price-to-sales multiples could collapse. x.com x.com 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 stocks look set to benefit as the market signals that open-weight models will help software and that AI extinction risk was overblown, with AI instead a net positive for growth and margins in coming years. The cloud software ETF is becoming one of the best-looking charts in the market and is close to clearing $37 resistance and a volume shelf. x.comÂ
Software's relative strength and sound finances make institutional rotation from semis plausible. It could lead while semis consolidate, despite slow growth at some firms; the market rewards cash flow, healthy balance sheets and manageable debt. Salesforce, ServiceNow, Palantir, Shopify and Workday hold up; SAP's cloud and AI shift, Instacart's massive 10-month base, Veeva's massive five-year base and Atlassian's Stage 2 strength add to the case. Semis may still rally; the view can change. x.com … Show more
ServiceNow's unexpected expense surge makes its rich valuation more vulnerable in a struggling software sector. Revenue rose 21%, but spending drove an EPS miss and one quarter of guided cRPO deceleration; wider market conditions could hurt near term. The 20% selloff looks excessive, and few software companies should benefit as much from AI. Management could deliver over 3-5 years, though the stock is only close to a buy again now; below $100 looks good for the long term. x.com 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
Bloomberg Intelligence sees fragmented enterprise-software markets as runway for large vendors to buy share, enter adjacent areas and strengthen AI, data and platforms. Serious software M&A is expected: Guidewire's $1.7B purchase of hyperexponential adds another deal after Salesforce's acquisition of Braze, which opened the gates. x.com x.comÂ
Salesforce looks vulnerable long term because users hate it and will happily switch to alternatives, while in the AI era users actually liking a product will be a key moat for SaaS stocks. Adobe showed this when users who hated it switched more easily to Figma. Present-day fundamentals look great across these companies, so the threat is still theoretical. x.comÂ
SaaS is more needed than ever because AI agents rely on secure, well-organized SaaS tools to do their jobs, which the market keeps getting wrong. Even when users stop opening apps such as Gmail, Notion or Quickbooks, they keep paying because their agents use them, and agents could not build equally secure, reliable replacements. Agents also drive far more work per day, requiring better data, CRM and content tools, which supports Salesforce and Snowflake at current prices. 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
