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Investment Q&A

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Q: Is AI a net headwind or tailwind for the software companies within CSU? Are their legacy companies particularly vulnerable to being displaced by AI?

Thanks.

Asked by Joel on May 30, 2023

5i Research Answer:

We think net AI would be a tailwind for vertical market software (VMS) companies within CSU. As for CSU’s group, its businesses mostly target to acquire VMS companies that provide critical solutions for their customers where there may be only a few (even one in some verticals) providers within that small market. AI would help improve efficiency for software users through automation. These value-added features would allow CSU to raise prices from its customers. However, we do not think the competitive dynamics of VMS software would change materially from here. There are certainly legacy players that could be at risk of being disrupted due to these AI trends such as IBM, CSCO, and SAP.

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