HSBC Dismisses 'SaaSpocalypse' Fears Amid $1 Trillion Sell-Off, Says 'Software Is Already Eating AI'

HSBC has downplayed concerns about AI replacing the software-as-a-service (SaaS) sector or an impending “SaaSpocalypse,” predicting instead that software will benefit from AI’s development.

The bank’s analysts believe that AI will not overthrow software, but rather be a significant beneficiary of its evolution. They argue that consumer AI platform developers, such as Alphabet (NASDAQ:GOOGL)(NASDAQ:GOOG), OpenAI, and Anthropic, lack experience in creating enterprise-class software and would face challenges in developing from scratch in complex areas, CNBC reported on Thursday, citing the HSBC note.

HSBC also highlighted that it would be neither practical nor cost-effective for companies to rely on AI to build their own in-house software. Even if AI-driven "vibe-coding" produced superior or free software, replacing the established vendors that run the daily operations of global firms would be highly challenging.

"Software is already eating AI" and would continue to do so, said HSBC.

The bank’s research team sees strong demand momentum for the software sector, which they believe is set to expand massively. HSBC maintains a Buy rating on several software stocks, including Oracle Corp. (NYSE:ORCL), ServiceNow (NYSE:NOW), Salesforce Inc. (NYSE:CRM), HP (NYSE:HPQ), and CrowdStrike (NASDAQ:CRWD).

Ives, Huang Push Back On “SaaSpocalypse” fears

The “SaaSpocalypse” fears were triggered by a massive valuation reset that wiped out nearly $1 trillion in market value, sending several industry giants like Salesforce, Atlassian Corp. (NASDAQ:TEAM), Zscaler, Inc. (NASDAQ:ZS) and Workday, Inc. (NASDAQ:WDAY) to 52-week lows.

However, Wedbush analyst Dan Ives told last week that the AI-led software stock sell-off was the “most disconnected trade” he had ever seen. The analyst argued that enterprise clients are firmly tied to platforms like Salesforce and ServiceNow, making immediate disruption unlikely due to high switching costs and long-term contracts.

Echoing HSBC and Ives, Nvidia (NASDAQ:NVDA) CEO Jensen Huang told CNBC on Wednesday that AI agents are unlikely to replace enterprise software. Instead, he expects software companies to leverage AI agents to enhance development and efficiency, describing agents as "tool users" rather than replacements. "I think the markets got it wrong," said Huang.

Meanwhile, on Wednesday, a product update on Cowork from Anthropic ignited a rally in enterprise software stocks like Similarweb (NYSE:SMWB), DocuSign Inc. (NASDAQ:DOCU), and FactSet Research Systems Inc. (NYSE:FDS), suggesting that the integration of AI in the software sector could potentially lead to growth, rather than displacement.

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