AI vs. software companies

[gfp]

18 minutes ago, frommi said:

Is that some kind of pair trade, long semis, short software?
Will be interesting when that blows up.

 

All sorts of funding shorts routinely get squeezed.  You are seeing it recently in GFS and CRWV, which were (still are) popular funding shorts.

[gfp]

The theme for quite a while now has been 'long scarcity', short abundance.  Software, outside of some incredibly compute intensive software like Claude, cannot be scarce by its nature.  The stuff that makes it such an unbelievably good business - that incremental licenses incur almost no incremental cost, if I can make one copy I can make 1000 copies, etc is the same stuff that ensures it will never be scarce.

 

Meanwhile, we have actual physical world bottlenecks all over the place.  Starting with energy and moving all the way down the five layer cake of the AI buildout.  Everything that is scarce is in the physical world, including certain commodities.

 

Memory can be scarce, GPUs can be scarce, CPUs can be scarce, capacity in a TSM fab can be scarce, Grid capacity or generation turbines can be scarce, Helium can be scarce.

 

Office 365 licenses are not scarce.

[Milu]

This is a very interesting article on how the future might develop for Salesforce.

 

https://www.saastr.com/salesforce-just-launched-headless-for-ai-agents-weve-already-been-living-it-for-6-months/

[whatstheofficerproblem]

22 hours ago, gfp said:

The theme for quite a while now has been 'long scarcity', short abundance.  Software, outside of some incredibly compute intensive software like Claude, cannot be scarce by its nature.  The stuff that makes it such an unbelievably good business - that incremental licenses incur almost no incremental cost, if I can make one copy I can make 1000 copies, etc is the same stuff that ensures it will never be scarce.

 

At an abstract level if you took the marginal price setters of stocks in aggregate (i.e. everyone ex passive/algo), I suspect looking-back on this moment, one would conclude this was the time of max uncertainty of business models and terminal value. Therefore, analogous to you holding a 30yr bond and increasingly uncertain about duration, you'd swap to a T-bill and near term certainty.

 

At a meta level that's what's going on, and because a narrow sleeve of the market is putting up growth (any fundamental KPI growth) today a large amount capital needs to find a home there. Or cash. Sounds absurd to think its Semis or... Cash. But here we are.

[Spekulatius]

On 4/23/2026 at 12:09 PM, gfp said:

The theme for quite a while now has been 'long scarcity', short abundance.  Software, outside of some incredibly compute intensive software like Claude, cannot be scarce by its nature.  The stuff that makes it such an unbelievably good business - that incremental licenses incur almost no incremental cost, if I can make one copy I can make 1000 copies, etc is the same stuff that ensures it will never be scarce.

 

Meanwhile, we have actual physical world bottlenecks all over the place.  Starting with energy and moving all the way down the five layer cake of the AI buildout.  Everything that is scarce is in the physical world, including certain commodities.

 

Memory can be scarce, GPUs can be scarce, CPUs can be scarce, capacity in a TSM fab can be scarce, Grid capacity or generation turbines can be scarce, Helium can be scarce.

 

Office 365 licenses are not scarce.

While this is true, GPU and Memory won’t be scarce for a long time as tech is very much deflationary. This is very similar to the Telecom boom where all sorts of things ( Tantalum, glass fiber, equipment for optical components etc) were in short supply all of a sudden but not for long.

[KPO]

4 minutes ago, Spekulatius said:

While this is true, GPU and Memory won’t be scarce for a long time as tech is very much deflationary. This is very similar to the Telecom boom where all sorts of things ( Tantalum, glass fiber, equipment for optical components etc) were in short supply all of a sudden but not for long.

Well said. It’s a man made constraint. It will self correct in 12-24 months, not many years.  Things like NTDOY will benefit inside of 18 months. It seems similar to the cocoa situation, which for a variety of reasons, was supposed to take 5-10 years to stabilize. It stabilized, and returned very close to prior levels in around 24 months. 

[Libs]

This is going viral. Makes me want to double down on certain software stocks......I love how the AI agent confesses to breaking the coding rules. What  disaster.

 

 

[Spooky]

On 4/21/2026 at 12:53 AM, LC said:

All these corporate end-users with proprietary data will be using a combination of models from the oligopoly of model producers (google, anthropic,openAI, etc.). Those models will have access to that data, don't you think it's feasible those producers will find some way to leverage/integrate that particular domain-specific data?

 

This is a big worry of mine. The AI companies and models are black boxes so it is so hard to know how they are using all the data being fed into them, even if you have contractual protections you will never be 100% sure. 

[Spooky]

On 4/21/2026 at 5:26 PM, Milu said:

I would say there is some degree of diminishing returns in that if you already have a large development team and loads of traditional resources then adding AI on top of that would improve things by a certain percentage, but for a start up looking to create a new workday solution and compete with them could catch up a lot faster than the incumbent can push ahead. 

 

I would disagree with this a little. At our company, with lots of software developers, we are trying to push people not to think about AI for a few percentage point increases in productivity but rather in terms of increasing it by 10X. Like the tools are there if we shift our thinking to really accelerate what we are doing.

[Saluki]

I don't know how to check each individual company for this, but it seems to me that whether a company will be hurt or help by AI might depend on how the services are priced to the customer. 

 

If it's something like Microsoft Office where they charge you a certain amount for each license, than if you have a third less employees, you would have less money.

 

Westlaw charged by the minute when I was working at a law firm. So people using AI features on it more would mean higher bills. 

 

What about something like Bloomberg terminals. If they charge for each terminal, not each employee, then it would depend. If they got rid of 30% of the workforce but the people use the terminals twice as much, they would need more terminals. If usage stayed the same because they are using alternate AIS instead of Bloomberg's terminals, then a 30% cut in workers would be 30% fewer terminals. It's hard to know how that would play out. 

 

I think for some kinds of software if the model after would be damaged by AI eventually they would change the pricing structure and things would even out as the contracts were renewed. 

 

Then again, I am pretty confident in my positions in things like Nintendo, meta, Google, Tyler( municipal contracts that can last decades ),  vrrm( red light cameras and places like New York where it is a multi-year rfp process), or TBTC which requires approval from gaming regulators to be able to sell to casinos, which would create a multi-year hurdle for new entrants. 

 

VRRM is kind of interesting because it relies on software but it also needs hardware, speed cameras, so you can't disrupt it with some lines of code. Code. I think along those lines utility meters like tantalus or badger meters also present an opportunity because of IOT which might be helped by AI.

 

[nsx5200]

 

 

So I find these videos on vibe coding instructive on what actually works, and what actually changed in software development with vibe coding.  Vibe coding is like dealing with an remote Indian team:  everything must be spelled out so there's very little room for free interpretation, otherwise, the AI may find some magic loophole that satisfies the ask without accomplishing the task.  Dealing with AI coding is like dealing with a Rumpelstiltskin contract.  So the hype/narrative around vibe-everything(level 5, according to the video), will most likely shift back to where humans will still need to be in the loop to at least know what's going when things breaks (and break it will due to Murphy's law).  Less actual low-level coder will be needed, but the remaining coders will need to be more experienced so that the proper maintainable solutions can be created.  At the end of the day, vibe coding is just another tool in the coding toolbox.

[NnnnotSoSmart]

Wasn't sure where to post this.  Searched and couldn't find an ADP thread.  

 

ADP has been a beautiful baby thrown out with the bathwater during the recent Saaspocalypse. Down 20% YTD. Bought some shares sub $200 a few days ago.

 

They just posted decent numbers this morning.  For the moment it doesn't appear that AI is hurting their business.

 

Automatic Data Processing's Fiscal Q3 Adjusted Earnings, Revenue Rise; Boosts 2026 Outlook
Automatic Data Processing (ADP) reported fiscal Q3 adjusted earnings Wednesday of $3.37 per diluted share, up from $3.06 a year earlier.

Analysts surveyed by FactSet expected $3.29.

Revenue for the quarter ended March 31 was $5.94 billion, up from $5.55 billion a year earlier.

Analysts polled by FactSet expected $5.85 billion.

 

The company said it now expects fiscal 2026 adjusted EPS to increase by 10% to 11%, compared with its previous guidance of 9% to 10%. It also said it now expects revenue growth of 6% to 7%, compared with approximately 6% guided previously.

 

Implementation of their "Lyric" platform is an example agentic AI tangibly improving business results with faster new customer implementation times, a 40% reduction in administrative overhead, automated compliance monitoring, and real time data refresh.  

 

https://archive.fast-edgar.com/20260429/ARZZB2228222G232222222Z2SNDMZ22I2382/

 

For a number of other reasons, I'm betting they'll survive.

 

 

Edited April 29 by NnnnotSoSmart

[frommi]

On 4/28/2026 at 2:54 PM, Spooky said:

 

I would disagree with this a little. At our company, with lots of software developers, we are trying to push people not to think about AI for a few percentage point increases in productivity but rather in terms of increasing it by 10X. Like the tools are there if we shift our thinking to really accelerate what we are doing.

How do you do that? In my team we use AI sparingly for clearly specified tasks (like refactorings or generating testcode) because as someone already mentioned here it tends to generate a lot of boiler plate code that we dont really want. And not understanding and being able to maintain the generated code is the way to get in trouble fast with real production code. I hear some stories where people go back to hand writing code already because in the end you are not necessary faster with AI, its just a different method to generate code. But maybe we are just using it wrong. 

[backtothebeach]

It’s been a week since the last post in this thread. The whole AI-is-going-to-destroy-software narrative is getting tired.
Something about the bounce in software stocks today feels strange to me. The CSU universe up bigly. NOW, ADBE, too. Maybe the pod shops are getting back into software?

[frommi]

Probably, i seriously think that going long software is now the same as shorting AI and semi stocks just without the downside risks of shorts.

[whatstheofficerproblem]

22 minutes ago, backtothebeach said:

Maybe the pod shops are getting back into software?

 

No. They will fade semis or more so opticals to rotate into the CPU play now. See ARM, AMD & INTC. This is a zero sum flow game and software thus far has nothing to show for as to attract their capital. For them, easier ways to make money in AI verticals.

 

The best activity you'll see here is likely these names being up on folks covering their shorts.

[Milu]

Looks like the short covering is done on the SAAS names, normal order restored today.

[whatstheofficerproblem]

1 minute ago, Milu said:

Looks like the short covering is done on the SAAS names, normal order restored today.

 

I have told myself this a lot of times over the last few years, didn't end well. I think I'm not alone in that boat, which is why a lot of folks have an aversion to SW now.

[DegenerateGambler]

I used to be a software developer and now started to use Cursor to code with AI.  I have not written a single line of code yet and it was all written by AI.  I would say it has increased my productivity by 20-30x at least, with some stuff I used to put off because i didn't want to write it and now I just ask the AI to write it.  The stuff is like magic.

[Milu]

42 minutes ago, DegenerateGambler said:

I used to be a software developer and now started to use Cursor to code with AI.  I have not written a single line of code yet and it was all written by AI.  I would say it has increased my productivity by 20-30x at least, with some stuff I used to put off because i didn't want to write it and now I just ask the AI to write it.  The stuff is like magic.

Yup, I am continually blown away by how good it is and how it can do stuff in minutes that used to take me days. 

[skanjete]

I was considering investing in some software companies because all have been bombed out. 

 

But then I learned about Lovable and Cowork. 

 

I don't know anything about coding and haven't written an single line of code since university. 

Although I do have an analytical mind. But with these 2 programs I tested what I could create. 

 

It's really mindblowing. After 1 day I decided to start a major digitalisation project at my own company and I started writing a tailor made ERP program for the business with an independent cloud based database, applications for production, field service, planning, offer configuration etc.

 

The only thing you have to do is analytically divide a problem into small modular problems, and then describe what you want in clear language to the model. The model takes care of the rest.

 

The results are incredible. 

 

By the way, I gave up on the idea of investing in software companies. The idea got shelved in the "to hard pile"

[frommi]

Do you use that ERP program in production? How many people in your company use it?

[frommi]

Maybe you still need software developers to develop software?
I heard that some people are already switching to using Qwen 3.6 and Deepseek free models because they are 10 times cheaper than OpenAI or Anthropic models and you can even host them locally. For coding that is.
Is this the true Deepseek-moment?

[MxMI17]

Some seriously deep insights on AI topic - https://www.bailliegifford.com/en/global/all-users/insights/ic-article/2026-q1-ai-isn-t-coming-for-your-job-it-s-coming-for-your-mind-10061431/

[Spooky]

On 5/10/2026 at 8:20 AM, frommi said:

I heard that some people are already switching to using Qwen 3.6 and Deepseek free models because they are 10 times cheaper than OpenAI or Anthropic models and you can even host them locally. For coding that is.
Is this the true Deepseek-moment?

 

At work we have access to Deepseek through Microsoft Foundry and it is hosted locally in the Microsoft Azure tenant so is considered a 1st party model. Pretty crazy. We also have access to like 20+ LLMs so it feels to me this layer will be commoditized.