Even if AI dramatically lowers coding costs, it won't destroy established SaaS businesses. Technical expenses only account for 10-20% of revenue for major SaaS players. The other 80% is spent on marketing, events, and client service, creating an opportunity for significant margin expansion.

Countering the narrative that AI will kill software, NVIDIA CEO Jensen Huang argues agents will be tool users, not tool builders. Just as a robot would pick up a screwdriver instead of reinventing one, AI agents will leverage existing platforms. This positions AI as an accelerator for current software, not an immediate replacement.

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 threat of AI to software isn't rendering it obsolete, but rather challenging its growth model. AI will make it harder for SaaS companies to implement annual price increases and will compress valuation multiples, creating stress for over-leveraged firms from the zero-interest-rate era.

Contrary to fears of AI making SaaS obsolete, the reality is that most enterprise software is deeply flawed. A contrarian view is that AI will provide the tools to finally rebuild these systems better, creating a massive new wave of demand for software development and product design.

AI favors incumbents more than startups. While everyone builds on similar models, true network effects come from proprietary data and consumer distribution, both of which incumbents own. Startups are left with narrow problems, but high-quality incumbents are moving fast enough to capture these opportunities.

Concerns about immediate AI-driven job losses are premature. True labor displacement requires a lengthy phase-in period for broad enterprise adoption, building new application layers, and integrating AI into existing workflows and processes, which takes significant time.

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.

Oren Zeev argues against the narrative that AI will kill all incumbents. He believes businesses with operational complexity, deep data moats, and strong distribution are not easily disrupted. These companies are more likely to leverage AI to their advantage, while simpler software companies are at greater risk.