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Feb 12
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SHORT
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Clare Pleydell-Bouverie
Tech Investor / Panelist
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"We think the market is really only just starting to price in the transition from Software 1.0... to Software 2.0... What we don't think yet is priced in is the margin compression... because AI software, there are actual real marginal costs to this." The last decade of SaaS investing was based on "write once, sell infinitely" with near-zero marginal costs (90% gross margins). AI Agents require heavy compute for every action. As software companies integrate AI to stay relevant, their cost of goods sold (COGS) will skyrocket, compressing valuations that were based on 90% margins. Short incumbent software companies with high valuations that are forced to pivot to high-cost AI models. Incumbents successfully monetize AI features at a premium that outpaces compute costs. |
CNBC
Panel weighs AI disruption, margin pressure a...
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Feb 09
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AVOID
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Ali Ghodsi
CEO, Databricks
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Traditional "System of Record" software companies (SaaS) are facing a "wipeout" scenario similar to the dot-com bust if they do not adapt immediately. These companies historically relied on two moats: a) The Interface Moat: Humans were trained on complex UIs, making switching costs high. AI Agents now use natural language, rendering the UI irrelevant. b) The Database Moat: Moving data was hard. New "Lakehouse" architectures allow AI agents to query data anywhere, breaking vendor lock-in. If a company charges based on "seats" (human users), their revenue will collapse as one AI agent replaces 10,000 human users. Databricks sees 80% of new databases being built by AI agents. Investors are privately questioning the efficiency and survival of traditional SaaS metrics behind closed doors. Incumbents with massive distribution might successfully pivot by integrating AI fast enough to protect their revenue base. |
CNBC
Under the hood of the AI economy: Databricks ...
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Feb 09
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AVOID
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Ali Ghodsi
CEO, Databricks
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Traditional SaaS companies rely on two moats: the User Interface (users are trained on it) and the Database (hard to migrate). Ghodsi argues both are evaporating. AI Agents interact with software via natural language, making the proprietary User Interface irrelevant. Furthermore, AI can easily restructure and migrate data, breaking the "lock-in" of the database. Companies that rely on "seat-based pricing" (charging per human user) will face a revenue collapse as one AI agent replaces 10,000 human users. Investors are privately questioning the efficiency of these SaaS companies. "Lazy" companies protecting existing revenue streams rather than innovating will be "wiped out." Some legacy companies may successfully pivot and integrate AI to lower their own costs, surviving the transition. |
CNBC
Preparing for another tech wipeout: Databrick...
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Feb 06
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AVOID
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Deirdre Bosa
Anchor/Reporter, CNBC Tech Check
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Software stocks are described as being in "freefall." The market believes AI technology has become so advanced that it will "eat these companies alive." If AI can automate the tasks that SaaS platforms currently perform, these companies face an existential threat of obsolescence. The segment highlights the sharp sell-off in this sector specifically due to the "AI destroys SaaS" narrative. The market may be overestimating how quickly AI can fully replace complex enterprise software suites. |
CNBC
The market's AI contradictions
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