CLSA: AI-caused "Software Demise" Concerns Are Overstated, SaaS Moat Remains Strong
CLSA stated in a detailed report that despite concerns in the market about the software industry being disrupted by the rise of AI models, Software as a Service (SaaS) is far from dead.
According to APP of Zhihu Finance, CLSA stated in a comprehensive thematic report that despite market concerns that the rise of AI models might disrupt the software industry, Software as a Service (SaaS) is far from dead. However, the sector must still undergo profound transformation before investor confidence can return.
The Hong Kong-based capital markets and investment group launched research coverage on several SaaS giants on Monday, including Microsoft (MSFT.US), Adobe (ADBE.US), Oracle (ORCL.US), Salesforce (CRM.US), ServiceNow (NOW.US), and Workday (WDAY.US).
CLSA analysts Bhavtosh Vajpayee and Hangyul Son stated: “The software share in IT spending has grown 2.5 times over two decades and now faces a reckoning moment fueled by the rise of AI. This cycle of reality-check is brutal but necessary.”
Vajpayee pointed out: “We are surrounded by business specifics, compliance requirements, and information filters managed by software. The idea that AI ‘vibe-coding’ will eliminate all these sounds unrealistic.
We see moats everywhere — ServiceNow’s workflow catalog, Salesforce’s sales connections, Oracle’s precise database, Microsoft’s ubiquity, Workday’s HR expertise, and even Adobe’s font library.”
CLSA gives Microsoft and Adobe an “outperform” rating with target prices of $535 and $300 respectively; Oracle and Salesforce are assigned “hold” ratings with price targets of $145 and $165; ServiceNow and Workday are rated “underperform” with price targets of $72 and $92, respectively.
Vajpayee added: “Of the six companies we cover, we recommend Microsoft as ‘outperformer’ due to its ubiquitous nature, despite the somewhat awkward Copilot, which even evokes memories of Clippy. Adobe also receives our ‘outperform’ rating—the current price has fully reflected market concerns, yet its moat is being overlooked by the market despite better-than-expected metrics.
Salesforce needs to see an inflection in growth before a rebound in valuation, while Oracle’s ambitious AI expansion seems more of an adventure—we prefer to wait and see. Both are rated ‘hold’. ServiceNow is the market darling, supported by resilient indicators, but the valuation remains high; Workday’s moat is weaker than most peers.”
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
You may also like
Crypto loans decline 16% in Q2 – Is the lending market resetting?
US long-term bonds sold off amid rising oil prices and fiscal pressures, 30-year yield rises to near 20-year high
U.S. Treasury yields generally rose on Monday as international oil prices surged again, fueling investors' concerns about persistently high inflation, an expanding U.S. fiscal deficit, and increased government debt supply.
Overnight US Stocks | US Treasury Holdings Decreased by China, Japan, and UK in June; All Three Major Indexes Closed Lower; SanDisk (SNDK.US) Rose Nearly 9%
At the close, the Dow Jones Industrial Average fell 272.39 points, or 0.51%, to 53,460.02 points; the S&P 500 Index dropped 40.39 points, or 0.52%, to 7,745.37 points; and the Nasdaq Composite Index declined 84.25 points, or 0.32%, to 26,644.91 points.
Bank of America dumps 80% of its Strategy shares, trimming position to $110M
Crypto prices
More
