Episode summary
Could AI Disruption Fears Trigger a Software M&A Boom? | WSJ's Take On the Week
The Journal
· · Hosts: Miriam Gottfried, Dan Gallagher · Guests: Brent Thill
Summary
The episode argues that the market is overpricing the risk that AI will wipe out business software, even though cloud and SaaS stocks have sold off sharply. The guest says the market is acting as if only Anthropic and OpenAI will build the future of software, while large enterprises will still need many vendors because of security, workflows, data access, and the need for backup systems.
Key takeaways
- Brent Thill says the market is pricing software as if only Anthropic and OpenAI will matter, but enterprises still need hundreds of specialized vendors.
- Brent Thill sees infrastructure names like Microsoft, Amazon AWS, Google, and Oracle as the safest software-related bets over the next 5 years.
- Brent Thill says security firms such as Cloudflare, Palo Alto Networks, and CrowdStrike should benefit as more AI apps create more breach risk.
- Brent Thill expects a “massive M&A boom” as depressed valuations and private equity dry powder push software consolidation.
- The host and Dan Gallagher argue that layoffs, seat-count pressure, and a shift toward consumption pricing are also slowing software growth independently of AI.
Notable quotes
“The market right now is implying there's going to be two companies that basically build the future of software uh anthropic and open AI”
“For the last 30 years, uh, many enterprises have relied on hundreds of software companies, not not two”
“I think the winners are pretty clear it's infrastructure, right? You need the agents are going to need somewhere to live”
“so I think the industry is yeah shifting you know the the the monetization model from just pure seats uh you look at salesforce.com right they have a seat model”
“Massive M&A boom. Massive. One of the biggest booms we've ever seen”
How the episode opens
The market right now is implying there's going to be two companies that basically build the future of software uh anthropic and open AI. And this fear we believe is greatly overexaggerated. — Hi everyone, I'm Miriam Gotthried and joining me today is my colleague on the street tech columnist Dan Gallagher. Hi Dan.
Hey, how's it going?
It's going well. Glad to have you on. So Dan, I am old enough to remember when business software, also known as software as a service or SAS, was one of the hottest sectors, but it's been kind of having a rough go of it recently um because of fears that AI will sort of replace the need for business computing software.
Um what have you been seeing out there, Dan? Uh well, you're exactly right that fear is out there. And I'm actually old enough to remember before we had software as a service when software really big the stuff that was like installed on a on a company's like premises on their own servers, you know, and we saw that transition happen.
Um you know, a lot of the older companies ended up like consolidating or getting bought out and then these the what we call cloud software companies came in. Um what we're seeing now is this fear that these AI tools, stuff made by Anthropic and OpenAI, um will enable big companies to essentially produce their own software. And if that happens, why would they buy expensive software subscriptions from big companies like Salesforce and Workday or smaller companies?
There's lots of companies in the space. And so you're seeing that disintermediation fear really kick in. And this um as one indicator this there's a s this index called the IGV index that's really closely tracked is already down in the first like six weeks of this year has already lost more than 20%.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai disruption fears
- saas software
- vibe coding
- cloud software selloff
- software m&a
Companies and tickers mentioned
- INTU
- CRM
- WDAY
- Intuit
- Salesforce
- Workday
Watch the episode
Watch “Could AI Disruption Fears Trigger a Software M&A Boom? | WSJ's Take On the Week” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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