We Need to Talk About SaaS Stocks

Something fascinating is happening to SaaS in the stock market: most companies have lost 50% of their value in just 12 months.

You could argue that there is a war impacting all stocks, but the 1-year return of the S&P 500 has actually grown +27.38% during the same period.

The paradox is that if you study the performance of most stocks in this sector, we are talking about financially sound businesses with steady earnings, growing revenues, and solid cash positions.

How can this happen? How can SaaS, the almighty business model that created a generation of billionaires and unicorns with infinite scalability and high margins, be decimated by the market today?

The answer is, once again, AI.

🤷‍♂️

Now, I know what you’re thinking.

Sorry to break it to you, but you won’t vibe-code a multi-billion dollar company like those. You won’t replicate their long tail of enterprise features, security, and integrations from the comfort of your Mac Mini (I call it vibe-thinking).

We all agree the cost of replicating software is dropping, but there’s no shortcut to the decades of marketing, incremental UX improvements and the network effect these companies have built. That’s not what the market is worried about.

The market is pricing in something much larger.

The hypothesis is: AI Agents will eventually replace the job of SaaS itself.

Why pay for a whole suite of tools when an AI agent can theoretically do the job and let you skip the interface entirely?

For example, at my company, we’ve already replaced our HR SaaS with an agent that handles contracts, onboarding, and stats with no interface - just Slack and soon voice. Our HR team (yes, we still use humans) simply talks to it in natural language.

We don’t need a dashboard anymore, and we certainly don’t need a pay-per-seat SaaS.

I see many examples like this happening with my clients.

The market is reconsidering if these stocks were simply mispriced given the uncertainty of AI in their verticals, and if it's time for some serious due diligence.

Decades of overvaluation with P/E ratios (how you value a business relative to the actual earnings) only possible in infinite markets are now being threatened by a classic, old-fashioned technology displacement.