🗞 AI v. Everything

Happy Sunday! 👋 

The AI debate rolls on! Today we’re taking a look at the latest AI discourse and the stocks it’s affecting.

Let’s dive in!

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Featured Story

AI v. Everything

By now, I’m sure you’ve heard of the “SaaS-pocalypse” hitting markets.

Roughly $2 trillion of market capitalization has been wiped out of the software sector over just the last 12 months alone.

Here are a few notable drawdowns over the last year:

• Figma: -74%

• Atlassian: -73%

• Asana: -63%

• HubSpot: -63%

• Workday: -49%

• ServiceNow: -41%

• Adobe: -40%

• Salesforce: -34%

• Automatic Data Processing (ADP): -31%

The culprit for this carnage? AI.

AI has made writing code and completing tasks faster and easier than ever before. This introduces new competition, increases employee productivity, and (in theory) allows organizations to build systems internally instead of buying from outside vendors.

The logic here is sound: Why would an organization pay $5 million a year for Salesforce, when they could use Anthropic’s Claude Code to build a CRM themselves in short order? Sounds nice.

But is this really playing out?

Doesn’t look like it.

*Note: Anthropic appears to have taken down this job posting after it went viral.*

While one of the most AI-forward companies in the world hiring someone to help manage the software it’s supposedly disrupting is certainly ironic, that alone doesn’t mean investors should dismiss the concern entirely.

But it seems this isn’t the only disconfirming evidence coming to light.

This quarter, HR enterprise software platform Workday, announced that they are seeing growth from existing customers like (you guessed it) Anthropic.

The notion that companies will start vibe-coding custom solutions instead of buying software from outside vendors has spooked investors because, well, it makes sense. At least in theory.

But in practice, this doesn’t seem to be happening. If you look at the job postings of the leading AI companies, you’ll notice that they (like every other company in the world) rely on many software vendors.

• OpenAI uses Oracle ERP for accounting.

• Anthropic uses Asana for scheduling and task management. 

• xAI uses Slack for internal communications.

• Perplexity uses Okta for identity management.

The list goes on and on.

But this week (thanks to this viral piece from popular substack Citrini) the conversation shifted from AI disrupting software, to AI disrupting marketplaces, like DoorDash or Booking Holdings.

The idea being that AI will give way to more competition for these marketplace businesses, and AI agents on the customer’s side will scan all alternatives to find the lowest cost option instead of just going through the leading platforms.

This idea spooked investors because, well, once again, it makes sense. In theory.

However, it seems to miss the mark on what makes marketplace businesses special to begin with. The hard part about building a marketplace isn’t designing an interface (although building a truly exceptional user experience is tougher than most people seem to think), it’s reaching sufficient scale.

Just think about the leading marketplaces today:

• Uber’s advantage isn’t their interface, it’s their driver & rider supply.

• Airbnb’s advantage isn’t their interface, it’s the hosts/listings on their platform.

• Meta’s advantage isn’t their interface, it’s the users on their apps.

There are countless examples of this, but ultimately with marketplaces, scale begets scale and network effects drive growth on their own.

That’s largely why a business like the New York Stock Exchange has lasted (and thrived) for more than two centuries.

Like the AI v. Software debate, the concern of disruption seems more narrative driven than evidence-based at the moment.

Whether it’s software or marketplaces, for investors, this AI doomsday narrative is creating opportunities to buy what have long been considered exceptional businesses at some of their lowest valuations of all time.

That’s all for this week. 

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