The real impact of AI on SaaS isn’t what investors think

Good morning. Fears that AI could render traditional software vendors obsolete triggered a broad SaaS and cloud sell-off in February, a rout that some investors dubbed “SaaSpocalypse.” The catalyst: Anthropic’s addition of a legal task plug-in to its Claude AI, which wiped roughly $285 billion in tech market value within 24 hours.

The anxiety was straightforward. If AI can perform the tasks once handled by specialized software, or generate bespoke code on demand, why keep paying for software platforms at all? In a Fortune feature, my colleague Jeremy Kahn, Fortune’s AI editor, argues that this framing misses the larger pattern. New technologies rarely eliminate their predecessors outright. More often, they reshape markets, compress margins, and shift where value accrues. Desktop publishing didn’t kill commercial printing, for instance. It democratized it.

For CFOs and finance leaders, this moment isn’t about whether SaaS disappears. It’s about how the economics of software are changing, and what that means for the buy-versus-build calculus. In fact, AI may actually fuel the software industry rather than gut it.

As Kahn notes, by lowering the barriers to writing code, AI could unleash a new wave of companies building specialized business applications, no longer dependent on scarce, expensive coding talent. Finance leaders should expect a shift in value from standalone products to integrated ecosystems.

SaaS profit margins may compress and consolidation may follow, but not because AI cannibalized the industry, Kahn explains. “It will happen because AI fed SaaS,” he writes. You can read Kahn’s deep dive, including insights from leading experts, here.

I recently spoke with Intuit CFO Sandeep Aujla, who sees the current volatility as part of a familiar cycle. From Y2K to the rise of the internet, each wave of technological change has sparked predictions of disruption while underestimating the durability of established business models, he said.

At the same time, large language model providers are increasingly partnering with incumbent software companies, particularly in regulated environments where accuracy and trust matter. The relationship, Aujla suggested, is less competitive than it appears. “These LLMs are not looking to work against us,” he said. “They’re actually looking to work with us.”

Is AI changing how you think about SaaS or just accelerating trends already underway? I’d like to hear how you’re approaching it. Send me an email.

Sheryl Estrada
sheryl.estrada@fortune.com

This story was originally featured on Fortune.com