AI can not only disrupt software, but also reshape the narrative of "profit growth"! Platform giants may become big winners as SaaS reaches a critical moment.

After conducting an in-depth interview and survey on the theme of "AI Replacement" with 30 Chief Information Officers from leading companies in various industries worldwide, Jefferies Financial Group Inc. analysts team stated that software giants such as Microsoft Corporation (MSFT.US), Snowflake (SNOW.US), and Oracle Corporation (ORCL.US) are preferred stock targets in the global enterprise software sector for the financial giant. They emphasized that these companies, which gather data assets and "AI + core operational processes" with high-quality fundamentals, are purely misguided by the pessimistic tone of "AI disrupts everything" led by agent-based workflow such as Claude Cowork and OpenClaw. Compared to potential AI winners such as Microsoft Corporation and Oracle Corporation, analysts at Jefferies Financial Group Inc. highlighted in their research report that SaaS software vendors like Adobe (ADBE.US) and Docusign (DOCU.US), whose product functions are easily consumed by model native capabilities, weak moats, heavy customization, and can be partially reconstructed into a single-function SaaS software vendor using agent-based AI intelligent body, may face a high probability of being completely disrupted by advanced AI technology. The analysts team of Jefferies Financial Group Inc. wrote in a report to their clients, "According to the latest survey respondents, an average of 8.7% of IT budgets are allocated to AI tools/assistance, with 63% of CIOs surveyed indicating that their companies have dedicated AI budgets." "This is consistent with the trend of rising prioritization of AI-related enterprise projects as companies shift from AI experimentation to actual deployment." Furthermore, the survey found that mega cloud computing service providers such as Microsoft Corporation, Alphabet Inc. Class C, and Amazon.com, Inc., as well as cutting-edge basic model laboratories such as OpenAI, and Anthropic, are also likely to be the largest beneficiaries of the AI wave. Considering their large AI computing power base and integrated platforms that cover the top AI large models and agent-based AI intelligent bodies globally from development, fine-tuning to deployment, this trend may not come as a surprise to investors. In the age of AI, software can completely disrupt and reshape the "profit growth narrative." According to analysts from Jefferies Financial Group Inc., they added, "When asked which providers will benefit the most as the scale of AI adoption increases, it is not surprising that cloud computing service providers (such as Amazon.com, Inc., Microsoft Corporation, Alphabet Inc. Class C) ranked first, with 33% of respondents selecting this category, followed closely by basic model laboratories (OpenAI, Anthropic, xAI, etc.), accounting for 30%." "Application-based large software platform vendors ranked third, significantly ahead of data software and early-stage AI startups (such as Sierra AI and Glean). In our view, this indicates that traders and investors' concerns about AI startups 'disintermediating' existing platforms may have been exaggerated, and the scale, core operational processes, data assets, and distribution channels constitute defendable moats." On the other hand, this Wall Street financial giant stated that according to the channel survey, Adobe and Docusign ranked as the two software companies facing the biggest threat from advanced AI technology. Up to 40% of respondents indicated that Docusign and Adobe are most likely to be completely replaced by AI technology in the next 5 years, with HubSpot (HUBS.US) following closely behind, accounting for approximately 33%. The analysts added, "We believe this reflects more the sentiment indicators of global top company CIOs' positioning in AI, and we still believe that all existing software vendors have the opportunity to innovate and grow into the largest beneficiary of AI." "It is worth noting that the alternative risks screened out for infrastructure and core operational process vendors are very low, which supports the view that platform software giants still have greater growth resilience." The analysts also pointed out that the final survey results suggest that application-based software faces "greater risk" compared to infrastructure software. Traditional star software companies such as Atlassian (TEAM.US), Workday (WDAY.US), ServiceNow (NOW.US), Salesforce (CRM.US), Figma (FIG.US), and Datadog (DDOG.US) were mentioned by some respondents as having a likelihood of being phased out by AI by more than 50% in the next 5 years. As the core viewpoint conveyed in the Jefferies Financial Group Inc. research report that enterprise AI budgets are prioritizing large cloud computing platforms and model layers also implies that the moats of platform software giants will be strengthened under the assistance of the most cutting-edge AI technologies such as agent-based workflows, while single-function SaaS faces pressure of being completely disrupted. In other words, as companies transition from AI experimentation to formal deployment, budgets will prioritize the platform software giants closest to core systems, core data assets, and core workflows, rather than single-point functional SaaS. With recent heavyweight AI agent products focusing on efficient workflows released by leading AI model companies such as Anthropic, OpenAI, at significantly lower costs, certain functional software services may be replaced. Global software stocks have suffered heavy sell-offs, with the iShares Expanded Tech-Software Sector ETF (code: IGV) tracking the American Software, Inc. Class A industry plunging approximately 30% from its historical high in September. The pessimistic tone of "AI disrupts everything" since February is mainly due to market concerns about the potential weakening of the entire software empire based on SaaS seating subscription revenue models by popular AI agent workflows such as Claude Cowork and OpenClaw (formerly known as Clawdbot, Moltbot), leading to a rare sell-off that quickly spread to industries such as insurance, real estate, trucking, and any other industry that appears to have seating revenue or labor-intensive business models markets believe that these industries will be completely disrupted by AI. Not only in the US market, but the software sector in global stock markets has experienced continuous declines since February in the panic of "AI disrupts everything." Despite the significant increase in buybacks in the US software sector, investors are not buying in, as the market is truly concerned about whether long-term fundamentals and business models will be completely reshaped by AI intelligent agents such as Claude Cowork and OpenClaw. Orlando Bravo, co-founder of Thoma Bravo, a prominent private equity investment giant focusing on software and technology industries in the US, stated on Tuesday that artificial intelligence will disrupt software companies faster, and the irreversible substantial impact on valuations that some companies are facing is "very reasonable." He stated at the Thoma Bravo investor conference held in Miami, "There are many software companies in the public market that will be completely disrupted by the most advanced artificial intelligence technologies. These software companies will be disrupted by AI regardless." The reason Microsoft Corporation and Oracle Corporation are more likely to be seen as AI winners is not just because they are "large companies with strong fundamentals," but because they occupy several layers that are most difficult to replicate in enterprise AI deployment: cloud infrastructure, system entry points, identity and security, data foundation, distribution channels, and operational processes closely tied to employee daily work. The essence of how Microsoft Corporation and Oracle Corporation benefit from the AI wave is not just "selling AI tools," but making AI an natural extension of the company's irreplaceable operational processes, which is the deepest moat. For example, Oracle Corporation has already tied OCI AI Agent Platform with databases, enterprise applications, and workflow automation. Oracle Corporation's founder, Ellison, has repeatedly emphasized that the software giant's strength comes from its long-standing proprietary data and business core process automation capabilities. SaaS vendors like Adobe and Docusign are closer to "single-point replicable functions" and are more susceptible to being directly generated or automated by general AI large models, and rely on seating fees. The pressure from AI on their pricing systems and product boundaries is greater. This is why Wall Street analysts have repeatedly mentioned that if software companies continue to remain in the mode of "selling single-point functions, seating fees, weakly tied to mainstream processes," investors are increasingly concerned about AI plugins/AI agents eliminating application-layer intermediaries. In conclusion, the final survey results indicate that with infrastructure software compared to application-based software seem to be facing "greater risk". Traditional star software companies such as Atlassian, Workday, ServiceNow, Salesforce, Figma, and Datadog were mentioned by some respondents as having a likelihood of being phased out by AI by more than 50% in the next 5 years.