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Report: AI Impact on Software - Will AI Eat Software?

  • 1.  Report: AI Impact on Software - Will AI Eat Software?

    Posted 3 days ago

    New GS Top of Mind Report focused on AI disruption of Software companies fully downlodable here.

    I'd added below key takeaways as well as a comprehensive table with Software players sorted by disruption risk.

    Gist:

    AI is likely to expand the software industry rather than shrink it, but it will increase competition and compress margins in some areas.

    Key Structural Shifts

    1. Software creation cost is collapsing

    • AI coding agents drastically reduce development time.

    • Smaller teams can build sophisticated products.

    2. Barriers to entry are falling

    • Startups can launch competitive products faster.

    • Some SaaS niches could face pricing pressure and commoditization.

    3. Software demand may actually increase

    • Lower development cost → more software built.

    • AI expands automation across industries.

    4. Incumbents still have strong moats
    Key advantages:

    • Enterprise customer relationships

    • Proprietary data

    • Distribution channels

    • Integrated ecosystems

    These advantages buy incumbents time to adapt.

    5. AI shifts value up the stack
    Value may move toward:

    • AI platforms

    • data infrastructure

    • workflow systems

    • AI orchestration layers

    Commodity apps may lose pricing power.

    US Software Industry Players by Disruption Risk

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    Carlos Salas
    Portfolio Manager & Freelance Investment Research Consultant
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