Software stocks have slumped on AI fears. Here's why that's a massive overreaction.

"The recent AI-inspired software meltdown is an enormous overreaction. SaaS companies are going to do just fine. In fact, they might see their businesses boom as a result of AI. After working for decades in the IT and cloud sectors, I know what it takes to build, sell, and maintain complex enterprise software. And it's clear to me that AI is not the threat that many investors fear."

"Software development has been transformed by AI. It's a near-perfect use case for generative AI: applying established patterns to a well-bounded use case, resulting in incredible productivity improvements. This coding revolution has led some commentators to predict that companies are going to write their own software, rather than buy it from SaaS vendors. This makes me wonder if these commentators have ever actually spent any time working in enterprise IT."

"Domain expertise (regulatory requirements, industry practices, supply chain expectations). Education (marketing, presales support, prototype creation). Support (upgrade help, customer use case enablement). Product management (selecting user personas to address, feature definition and prioritization, prioritizing customer groups to address). Financial negotiation (special deals for volume, discounts for public endorsement, and so on). Legal 'immunization' (indemnification, public policy advocacy to shape process guidelines)."

AI fears of massive software disruption are overstated and established SaaS vendors are positioned to benefit and grow. AI improves developer productivity but writing code alone does not deliver enterprise-ready products. Successful enterprise software requires domain expertise, education and enablement, ongoing support, product management, commercial negotiation, and legal protections. Many enterprise DIY projects fail for lack of these capabilities, favoring mature SaaS providers. AI startups face scale, integration, and operational challenges when competing with incumbents. SaaS incumbents provide integrated solutions and customer-facing services that AI alone cannot replicate. Overall, AI becomes an accelerant for SaaS adoption rather than a replacement.

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