Is AI Killing SaaS? Why Software is the New Iron Ore and Copper
If you are worried about your SaaS company stock options or ESPP right now, you aren’t the only one. Many tech employees and investors are looking at their portfolios and wondering what comes next.
As a market practitioner, I’ve been tracking the severe hit SaaS companies are taking, and unfortunately, it doesn’t look like a temporary dip. In my latest video, I break down the macroeconomic conditions driving this correction and why the fundamental nature of software is changing.
Software is Becoming a Commodity
The reason for the pain in the SaaS sector is pretty simple when you take a step back: AI is turning software into a commodity. [00:00:45]
Just like iron ore, copper, or aluminum, software is no longer a premium moat. Anyone with access to AI can create SaaS replicas and flood the open market at a fraction of the traditional cost. The market is actively pricing in this new reality, which is why we continue to see these stocks face downward pressure.
Market Leaders and Private Credit Risks
Even some of the established market leaders have undergone significant corrections. When you combine this with all the underlying risks in the private credit market, the sustainability of these companies’ current run rates becomes a very real concern. [00:01:27] This is a high risk we need to monitor closely in the coming months.
Are the “AI Shovel Sellers” Exhausted?
What about the commodities, power companies, and data centers that fueled the initial AI boom? [00:02:02]
These “shovel sellers” have been leading the show, holding strong even as the broader market took a beating. However, I am now seeing these stocks get exhausted as well. Unless we see a major new catalyst beyond geopolitical events (which the market has already priced in), it’s hard to see how they push significantly higher. We are currently in an extremely narrow market—it might look great on the surface, but underneath, it’s struggling.
The #1 Mistake You Can Make Right Now
If you are holding individual company stock and relying on friends for advice on whether to buy or sell, you need to pause. [00:02:46]
The number one mistake retail investors make is failing to understand the market conditions they are in. Most of the time, the macro environment might not seem to matter, but when it matters, it really matters. Educate yourself on the current state of the market before making decisions about your ESPP or long-term holds.
What do you want to see next? I am planning my upcoming content and would love your feedback. Let me know in the comments below what topics you’d find most helpful:
- Broad Market Commentary
- Tech & AI Investing
- Active Trading Strategies
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