You’d have to be pretty brave to go bargain-hunting in the hard-hit software scene, especially as the year started with a so-called SaaS-pocalypse sparked by AI disruption fears. Indeed, there’s a good chance that the selling has been overdone and that AI’s impact might be more benign than expected as the SaaS players pivot to become AI plays themselves. Still, it’s never fun to be forced to transition business models after the fact.
It’s too soon in the game to say that it’s safe to go bottom-fishing for SaaS. I do think that some of the names are better positioned than others to win as the age of AI advances. Indeed, you simply cannot ignore the AI impact anymore. The technology is just going to get even more profound and disruptive with time. It’s the worst that it’ll ever be in its current state, especially if the firms spending all the money on AI-related CapEx get that big payoff sooner than expected.
The case for bargain-hunting in software
The rise of vibe-coding and agentics is changing the software business. But, in my view, AI coding is just another tool. And under the right hands, it could help disrupted firms become disruptors again. Any way you look at it, software moats are eroding, and the real value, in my view, lies in how firms can level up their capabilities now that more software can be produced at a lower price point.
Indeed, for software innovators who have to pay coders, quality assurance analysts, and user experience designers, shouldn’t the rise of powerful AI coding tools and agentic swarms be a good thing? For the firms that have grown complacent, it’s an existential threat as AI eats away at the impressive margins of the industry. However, for the firms willing to continuously innovate, I do think AI’s augmentative effect is a massive positive that investors might be underestimating.
For investors willing to look beyond the AI marketing hype, the following trio, I believe, should be safe from AI’s disruptive impact. And the real question is whether AI stands out as a net positive as the firms look to make more, better software, which stands to play better with AI agents.
Indeed, software isn’t going to be obsolete among agents. Rather, it’s going to need to evolve, and with the rise of agentic coding, I do think that the evolution could be fast as a wave of cheap, highly-capable and powerful software is unleashed upon the world.
Palo Alto Networks
It made no sense as to why Palo Alto Networks (NASDAQ:PANW | PANW Price Prediction) and the cybersecurity innovators tanked in the earlier days of the SaaS-pocalypse. The market’s “mistake” has since been corrected, with shares now melting up to new all-time highs. The stock soared over 9% on Monday, and that 35% drop from over six months ago now looks like a relatively small blip.
At the end of the day, agentics isn’t just a catalyst for better defenses; it’s turned comprehensive cybersecurity solutions into a non-negotiable must for just about everybody. Anthropic’s Claude Mythos is an accelerant, rather than an existential threat to cybersecurity.
I don’t know about you, but Mythos’ discovery of a ton of vulnerabilities across all software would want me to increase my cybersecurity spend, perhaps significantly, not decrease it. While the “big steal” opportunity is over when it comes to the stock, I still think shares are underpriced.
Datadog
As agents become more prevalent, the necessity of observability, I believe, could take things up several notches. Indeed, just like with Palo Alto, the market has corrected shares of Datadog (NASDAQ:DDOG) to the upside. And while the shares are quite expensive, I do think that demand for its solutions is only going to go up as more agents hit the ground running.
With Truist recently upgrading the stock, citing adoption of such critical tools over optimization (we’ve already seen that firms are prioritizing spending to be first rather than looking for efficiencies). Add a potential agent inflection point into the equation, and perhaps Datadog stock might not be as pricey as it looks today.
Contact [email protected] for any questions or corrections.
Top Gaining Stocks
Top Losing Stocks