-
Constellation Software Inc. (CSU $3,382.25)
-
Topicus.com Inc. (TOI $131.57)
-
Lumine Group Inc. (LMN $31.30)
Q: What do you think about the concept of AI, with the corollaries of ‘vibe-coding’ and lowered barriers to software creation, affecting the above businesses?
I hear an increasing number of guests on CNBC and posts on X predicting the ‘death of SaaS’ because of this.
The above companies all benefit from perceived niche software, and charge fees that reflect this. Is niche software not going to be so hard to penetrate in the future by new, cheaper entrants?
And will this actually have to happen to affect the share prices of the above at some point, but just the expectation of it happening? Thx.
I hear an increasing number of guests on CNBC and posts on X predicting the ‘death of SaaS’ because of this.
The above companies all benefit from perceived niche software, and charge fees that reflect this. Is niche software not going to be so hard to penetrate in the future by new, cheaper entrants?
And will this actually have to happen to affect the share prices of the above at some point, but just the expectation of it happening? Thx.
5i Research Answer:
We think the sentiment shift is possible, and might be occurring now as we are seeing some unusual weakness in some of these names. However, the fundamental shift we think will take longer and these stocks we think can still do well. Essentially, the individual companies and their subsidiaries are not going to be caught 'flat-footed' on AI and will adapt to changing customer needs and competition. Margins could increase if AI is utilized effectively. We think we are still a few years away from customers adopting a 'do it yourself' approach to their software. One 'screw up' would be very costly and we think most will continue to outsource until AI is far more established. Still, it is a long term concern that needs to be watched.