The massive CapEx from companies like Alphabet and Amazon isn't just to compete in the existing software market. The scale of investment only makes sense when viewed as an attempt to capture a significant portion of the $6 trillion U.S. white-collar labor market through automation.

AI will not primarily disrupt SaaS incumbents like Salesforce. Instead, its main economic impact will be automating repetitive labor, a market 40 times larger than enterprise software spend. AI-native companies are targeting labor-intensive roles like customer service, not trying to replace existing software subscriptions.

The primary economic incentive driving AI development is not replacing software, but automating the vastly larger human labor market. This includes high-skill jobs like accountants, lawyers, and auditors, representing a multi-trillion dollar opportunity that dwarfs the SaaS industry and dictates where investment will flow.

The economic incentive for VCs funding AI is replacing human labor, a $13 trillion market in the US alone. This dwarfs the $300 billion SaaS market, revealing the ultimate goal is automating knowledge work, not just building software.

The true market opportunity for AI is not merely replacing existing software but automating human labor. This reframes the total addressable market (TAM) from the ~$400 billion global software industry to the $13 trillion US-only labor market, representing a thirty-fold increase in potential value.

While AI can improve existing software categories, the most significant opportunity lies in creating new applications that automate tasks previously performed by humans. This 'software eating labor' market is substantially larger than the traditional SaaS market, representing a massive greenfield opportunity for startups.

The $15-$25 per-review price for Anthropic's tool moves AI expenses from a predictable monthly software subscription to a variable cost that scales like human labor. This forces CTOs to justify AI budgets with direct headcount savings, creating immense pressure on ROI.

Anthropic's and OpenAI's massive revenue forecasts ($300B+ combined) aren't about displacing existing software spend. The core bet is that AI will capture a large portion of the trillion-dollar consulting and services budget, dramatically expanding the total addressable market for technology.

Elad Gil argues that the total addressable market for AI companies is not limited to traditional seat-based software pricing. Instead, it encompasses the multi-trillion dollar human labor market that AI can augment or automate.