The market is simultaneously devaluing software companies because AI is a viable competitor, while also punishing AI infrastructure companies for their massive capital expenditures with uncertain returns. This contradictory fear creates broad, indiscriminate selling.

The "SaaS-pocalypse" isn't about AI replacing software overnight. Instead, AI's disruptive potential erases the decades-long growth certainty that justified high SaaS valuations. Investors are punishing this newfound unpredictability of future cash flows, regardless of current performance.

The downturn in software stocks isn't tied to current earnings. Instead, investors are repricing the entire sector, removing the premium they once paid for its perceived safety and stable, long-term contracts, which are now threatened by AI disruption.

AI is making core software functionality nearly free, creating an existential crisis for traditional SaaS companies. The old model of 90%+ gross margins is disappearing. The future will be dominated by a few large AI players with lower margins, alongside a strategic shift towards monetizing high-value services.

The recent software stock wipeout wasn't driven by bubble fears, but by a growing conviction that AI can disintermediate traditional SaaS products. A single Anthropic legal plugin triggered a massive sell-off, showing tangible AI applications are now seen as direct threats to established companies, not just hype.

For over a decade, SaaS products remained relatively unchanged, allowing PE firms to acquire them and profit from high NRR. AI destroys this model. The rate of product change is now unprecedented, meaning products can't be static, introducing a technology risk that PE models are not built for.

The ongoing decline in growth rates for public SaaS companies has created an existential crisis around revenue durability. Investors have lost confidence that traditional SaaS models can sustain growth in the face of AI disruption, leading to a massive valuation collapse.

The recent $300B SaaS stock sell-off wasn't driven by current performance. Investors are repricing stocks based on deep uncertainty about whether legacy software companies or AI-native firms will capture the value of automating human labor in the next 3-5 years.

The lucrative maintenance and migration revenue streams for enterprise SaaS, which constitute up to 90% of software dollars, are under threat. AI agents and new systems are poised to aggressively shrink this market, severely impacting public SaaS companies' incremental revenue.