The true financial windfall from AI won't come from hyped, "AI-native" companies like OpenAI. Instead, established giants like Meta and Amazon will generate massive shareholder value by applying AI to optimize their existing, scaled operations in areas like ad targeting, logistics, and robotics.

Unlike the slow denial of SaaS by client-server companies, today's SaaS leaders (e.g., HubSpot, Notion) are rapidly integrating AI. They have an advantage due to vast proprietary data and existing distribution channels, making it harder for new AI-native startups to displace them. The old playbook of a slow incumbent may no longer apply.

The AI revolution may favor incumbents, not just startups. Large companies possess vast, proprietary datasets. If they quickly fine-tune custom LLMs with this data, they can build a formidable competitive moat that an AI startup, starting from scratch, cannot easily replicate.

The "SaaSpocalypse" narrative misses a key reason large enterprises buy from vendors like Salesforce. It's not just about features, but accountability—like hiring McKinsey, it provides "air cover" and "a throat to choke." This institutional trust is a powerful moat against nascent, AI-generated tools.

AI doesn't kill all software; it bifurcates the market. Companies with strong moats like distribution, proprietary data, and enterprise lock-in will thrive by integrating AI. However, companies whose only advantage was their software code will be wiped out as AI makes the code itself a commodity. The moat is no longer the software.

The AI investment case might be inverted. While tech firms spend trillions on infrastructure with uncertain returns, traditional sector companies (industrials, healthcare) can leverage powerful AI services for a fraction of the cost. They capture a massive 'value gap,' gaining productivity without the huge capital outlay.

The market has overreacted to AI's threat to SaaS giants like Salesforce and Adobe. While AI can replicate code, it cannot easily replace the years of deep integration into client billing, customer service, and employee training. These high switching costs are being ignored, making their stocks undervalued.

Even as AI makes building software easier, pricing power is retained by companies with strong brands and distribution channels. Established players like Salesforce haven't lowered prices despite immense competition, proving that market presence and trust are more durable moats than easily replicated technology.

The market fears that AI will instantly replace enterprise SaaS platforms are overblown. Companies like Salesforce and Adobe are deeply embedded in corporate workflows with massive switching costs. They are now trading at low multiples despite strong growth, presenting a significant investment opportunity.