There’s been increased anxiety when it comes to the semiconductor stocks of late, with some of the bigger winners taking on bigger hits in recent weeks. Add the recent surge in oil prices and geopolitical turmoil, and the entire market might be in a position to give back gains as we head into late summer. Of course, the AI trade is still very much in play, even if there’s a bit of struggle for direction when it comes to actual monetizable AI applications.
The picks-and-shovels plays were great in the earlier days, but it feels like the market is content waiting to see what happens next with AI before continuing to reward the semiconductor names that could see explosive sales collapse without a moment’s notice if the AI payoff winds up further off, such that the hyperscalers have flexibility to cap AI spending.
Indeed, if a cap, rather than a cut, on CapEx is enough to spark a semiconductor meltdown, the market may be right to question the longevity of the mind-blowing earnings numbers we’ve been seeing from them of late.
Claude Mythos was huge. There will be more game-changing disruptive innovations
In my view, some game-changing applications have already arrived that support the thesis for keeping the AI race going as fast as it can go.
Whether it’s Mythos for cybersecurity or Siri AI for consumers, it feels like we’ve already been dealt a hint of the kind of disruption that AI is capable of, but, of course, that’s just my humble opinion. At this juncture, it feels like agentic AI’s takeoff is right around the corner.
Still, it’s difficult to visualize what that means since agents have been a bold promise for well over two years now.
As we move into dynamic app generation, agentic swarms, world models, and the rise of robotics, perhaps the next wave of potential disruptive applications could pressure software again. Indeed, software has already pivoted by getting into agents and all the sort. But, at the end of the day, it feels like the SaaS-pocalypse might have a second major act (SaaS-pocalypse 2.0?), and one that could be sparked by AI’s next big application.
AI’s next act could weigh on software
As generative UX and zero-UI execution become a thing as the costs of tokens nosedive, the big question is what could happen to the SaaS seat counts when the workflow as we know it has shifted and agentic outcomes become the new money-maker.
In my view, cheaper tokens and more capable agents could mean more profound change coming for the software industry.
Of course, as software development costs collapse, we’ll have more software (think generative UX) and applications, but the big question is whether it’s frontier AI labs that will be making much of that software or if it’s the traditional software companies that will make use of agents to create the software.
I think the main risk is the former, and that’s why I’m in no rush to buy the dip in some of the more vulnerable software names out there, especially those that haven’t yet aggressively pivoted towards AI with innovations that go beyond just wrappers.
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