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Home / Themes / AI Short '26: AI-Obsolete Software

Theme thesis · 5/5 sections · Tickers 9 with notes · 6 pending

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Bull / Bear Details has the investment thesis and bull/bear points. Overview is monitoring guidance (hiring, forums, second-order trends, search keywords, Google Trends, datasets).

Bull / Bear Details

The theme posits advanced AI will render traditional software obsolete. While incumbents adapt and leverage data moats, the rapid commoditization by generative

Thesis

The theme posits advanced AI will render traditional software obsolete. While incumbents adapt and leverage data moats, the rapid commoditization by generative AI, proliferation of open-source tools, and rise of agentic systems increasingly threaten core functionalities, making the obsolescence thesis more compelling.

Bull case

The rapid advancement of generative AI models and 'world models' increasingly automates complex tasks, creating 'good enough' alternatives that bypass specialized commercial software. This commoditizes core functionalities, leading to value abstraction and reducing the need for traditional deterministic workflow tools.
The increasing availability of high-performance open-source AI models and hyperscalers bundling comprehensive AI and data tools empowers enterprises to build custom, AI-driven solutions. This reduces reliance on commercial off-the-shelf software, enabling 'homegrown' tools or internal scripts that displace existing vendors.
Autonomous AI agents are increasingly orchestrating complex workflows across disparate systems, abstracting away the need for direct user interaction with traditional software interfaces. This shifts value accrual to the agentic layer, potentially leading to 'agentic overhead' for incumbents if not effectively monetized, and displacing traditional software.

Bear case

Leading software providers are aggressively embedding AI into their core platforms, expanding AI-powered offerings, and demonstrating strong AI-driven revenue growth and monetization. This proactive adaptation transforms existing software into 'AI-native' solutions, extending their relevance and delaying obsolescence.
Established software companies possess vast, proprietary datasets and 'world models of work' or 'context engines,' built on decades of enterprise workflow data. This deep, mission-critical data provides an unmatched advantage for their AI solutions, enabling trusted, auditable, and differentiated outcomes that pure-play AI models cannot easily replicate.
Enterprises face significant 'AI anxiety' and practical challenges in fully adopting and realizing value from new AI features. Emerging legal challenges, such as AI bias lawsuits (e.g., Workday), and increasing regulatory hurdles (e.g., EU AI Act) create friction, slowing the pace of AI deployment and monetization for incumbents.

Overview

Hiring Trend Watchpoints

High-performing operators are actively leveraging AI to maintain flat or reduce overall headcount, particularly in non-AI engineering and operational roles, as seen with Salesforce, Workday, and ServiceNow. Watch for: (1) Confirmation: Sustained flat or declining headcount in non-AI specific roles, coupled with increasing hiring for AI/ML engineers, prompt engineers, and AI governance specialists. A consistent increase in median revenue per employee (>10% YoY) across top enterprise software companies would strongly confirm AI-driven productivity and the 'obsolescence' aspect of the theme. (2) Deterioration: Broad headcount increases, particularly in non-AI or traditional software development roles, or a stagnation/decline in revenue per employee, would signal that AI is not yet driving the anticipated productivity gains or role displacement.

Forum Watchlist

subreddit — r/singularityHigh
Discussions on AGI, AI's disruptive potential, and impact on traditional software paradigms.
forum — Hacker NewsHigh
New AI tools, open-source models, developer sentiment on AI-driven code generation, agentic systems, and software development trends.
subreddit — r/sysadminMedium
Discussions on enterprise software implementation challenges, AI integration issues, and total cost of ownership.
subreddit — r/SREMedium
Community sentiment and 'build vs buy' discussions regarding AI-driven observability tools and open-source LLM wrappers.
subreddit — r/artificialMedium
General AI news, breakthroughs, ethical implications, and enterprise applications.

Second Order Trends

The acceleration of 'Agentic Enterprise Transformation' remains a core trend, with AI agents moving beyond features to orchestrate entire workflows. A significant second-order trend is the increasing focus on AI Governance, Ethics, and Compliance, driven by emerging regulations (e.g., EU AI Act) and legal challenges (e.g., Workday's AI bias lawsuit). This 'AI anxiety' among enterprises is slowing adoption and increasing demand for auditable, trusted AI solutions. Another trend is the democratization of content creation and workflow automation through AI-first freemium models (Adobe) and browser-based tools (Unity), expanding the addressable market beyond traditional power users. Finally, the commoditization pressure from hyperscaler and open-source AI models continues to drive incumbents to differentiate through proprietary data moats and specialized context engines.

Search Keywords Brand Product

Agentforce
Now Assist
Firefly
Acrobat AI assistant
Adobe Express AI
Vector AI
Unity 6
iLEVEL
ChatIQ
Bits AI
Flex Logs
Sana Travel Agent
Sana for ITSM
Headless 360
Data 360
Customer 360
Creative Cloud AI
Document Cloud AI
Experience Cloud AI
Capital IQ Pro AI
Platts Connect AI
Kensho Link
Cloud SIEM
Workday GO
HRScale
Workday Recognition
Workday Extend Pro
Self-Service Agent
Deployment Agent
Sana
Paradox
Moveworks
Armis
Veza
Employee Works
Now Platform
IT Service Management AI
IT Operations Management AI
Customer Service Management AI
Security Operations AI
LevelPlay
Unity Cloud
Unity Pro
Unity Enterprise
Unity Editor
Unity Runtime
S&P 500 on-chain
DeepAI DevAgent
Datadog for AI
Model Context Protocol
Datadog Security
Datadog Observability

Search Keywords Policy Regulatory

AI bias lawsuit
AI governance
AI ethics
data privacy AI
AI regulation enterprise
AI compliance
EU AI Act impact
AI hiring tools discrimination

Search Keywords Event Phrases

Cannes Lions Festival of Creativity Adobe
GDC AI authoring beta
Workday AI lawsuit ruling
Q2 2026 earnings enterprise software
hyperscaler AI model launch

Google Trend Product Category Intent

• Acrobat AI assistant reviews • Adobe Express AI features • Salesforce Agentforce demo • Workday AI solutions pricing • ServiceNow Now Assist benefits • Unity Vector ad network performance • Datadog Cloud SIEM comparison • HubSpot AI tools for marketing • Sana Travel Agent reviews • Firefly AI image generation • ChatIQ S&P Global features • Bits AI Datadog pricing

Google Trend Consumer Intent

• AI tools for graphic design • AI for customer service automation • AI for HR management • AI for game development • AI for financial analysis • AI for IT operations • AI for marketing professionals • AI for business workflows • AI productivity tools

Google Trend Macro Policy Terms

• AI job displacement • AI ethics in hiring • AI data security • AI regulatory framework • EU AI Act enterprise • AI liability software

Top datasets to track

1. Adobe Freemium MAU & Firefly ARR Growth Type: Company Financial/Usage Data · Provider: Adobe Inc. Earnings Reports Cadence: Quarterly Why it matters: Indicates the success of Adobe's AI-first freemium strategy and its ability to expand its user base and monetize AI innovations, a key driver for long-term growth. Suggested query: Adobe Q3 FY26 earnings MAU Firefly ARR Confidence: High

2. Enterprise AI Software Spending Surveys Type: Industry Research/Economic Data · Provider: Gartner, IDC, Forrester Cadence: Semi-Annually/Annually Why it matters: Measures the overall market adoption and budget allocation towards AI-native enterprise software, indicating whether the theme of AI-obsolete software is accelerating or slowing. Suggested query: Worldwide AI Software Market Forecasts 2026 Confidence: High

3. AI/ML Job Postings & Skill Demand Type: Labor Market Data · Provider: LinkedIn Economic Graph, Indeed Hiring Lab, Burning Glass Cadence: Monthly/Quarterly Why it matters: Tracks the shift in workforce demand towards AI-specific roles and away from traditional software development, confirming the 'AI-obsolete' aspect of the theme and companies' strategic pivots. Suggested query: AI engineer job trends enterprise software Confidence: High

4. AI Bias & Compliance Lawsuit Filings/Outcomes Type: Legal/Regulatory Data · Provider: Federal Court Dockets, Legal News Outlets Cadence: Ongoing/As Events Occur Why it matters: Directly impacts enterprise adoption of AI, particularly in sensitive areas like HR (Workday). Increased legal scrutiny or adverse rulings could slow monetization and increase compliance costs. Suggested query: AI hiring tool discrimination lawsuits Confidence: High

5. Aggregate AI-Native Revenue Contribution for Major Enterprise Software Vendors Type: Company Financial Data · Provider: Individual company earnings reports (e.g., Salesforce, ServiceNow, Adobe) Cadence: Quarterly Why it matters: A rapidly increasing percentage indicates AI is becoming the dominant revenue driver, displacing traditional software offerings and making them obsolete, supporting the short thesis. Suggested query: Salesforce AI-native ARR growth ServiceNow AI commit target Confidence: High

Key Metrics3 rows

Metric	Cadence	What It Signals	Update Source
Annual Growth Rate of Global Enterprise Spending on AI-Native Software Solutions	Annually (with interim quarterly updates/forecasts)	Sustained high growth (e.g., >30% YoY) indicates rapid adoption of AI-native solutions, accelerating the obsolescence of traditional software, supporting the short thesis.	LLM_Approved
Aggregate AI-Native Revenue Contribution for Major Enterprise Software Vendors	Quarterly (as companies report earnings)	A rapidly increasing percentage (e.g., >5% QoQ increase) indicates AI is becoming the dominant revenue driver, displacing traditional software offerings and making them obsolete, supporting the short thesis.	LLM_Approved
Median Revenue per Employee for Top 50 Global Enterprise Software Companies	Annually (after full-year reports)	A consistent increase in revenue per employee (e.g., >10% YoY) signals AI-driven productivity, leading to obsolescence of traditional software tasks and roles, supporting the short thesis.	LLM_Approved

Upcoming Catalysts20 rows

Catalyst	Estimated Timing	Estimated Date Start	Estimated Date End	Why It Matters	Ticker Or Theme Specific	Source Types	Contributing Tickers	Mention Count	Base Score	Source Weight	Specificity Weight	Macro Bridge	Macro Bridge Multiplier	Theme Score	Date Aggregated	Manual Override	Bridge Mention Count	Theme Base Score	Theme Importance Score	Catalyst Source	Catalyst ID	Transcript Date	Source Type
The phased implementation of the EU AI Act, particularly provisions related to high-risk AI systems, is expected to come into effect, introducing new regulatory burdens and compliance requirements for enterprise software vendors operating in the European Union.	Mid-2026 onwards	2026-07-01	2026-09-30	Increased regulatory scrutiny and compliance costs could slow the pace of AI deployment and adoption across multiple constituent tickers, especially those with significant European operations, potentially favoring established, trusted vendors who can navigate these hurdles or hindering the rapid rollout of new AI features.	Theme	theme_composer	ADBE, CRM, WDAY, NOW, U, SPGI, DDOG	7	10.5012	1.18	1.0	Regulatory/Policy	1.35	1672.8459	2026-07-22	False	1	1.2111	192.9288	Theme composer
Upcoming Q2 and Q3 2026 earnings reports from major enterprise software vendors will provide crucial updates on AI-native revenue growth, customer adoption rates of AI features, and management's outlook on AI's impact on traditional software.	Late July - August 2026	2026-07-22	2026-08-31	These reports will directly signal whether AI is accelerating the obsolescence of traditional software (supporting the short thesis) or if incumbent companies are successfully integrating and monetizing AI, leveraging their data moats and adapting their offerings. Key metrics like AI-native ARR and customer adoption will be closely watched.	Theme	theme_composer	ADBE, CRM, WDAY, NOW, U, SPGI, DDOG	7	9.9412	1.18	1.0	Economic	1.25	1466.3218	2026-07-22	False	1	1.2111	178.6378	Theme composer
The announcement or release of a significantly more capable generative AI model from a major hyperscaler or a breakthrough in open-source AI frameworks.	Q3 2026	2026-07-01	2026-09-30	Such a development could accelerate the commoditization of core software functionalities, providing 'good enough' alternatives that bypass commercial platforms and reducing reliance on specialized software, thereby supporting the 'AI-Obsolete Software' short thesis for multiple tickers.	Theme	theme_composer	ADBE, CRM, WDAY, NOW, U, SPGI, DDOG	7	9.1011	1.18	1.0		1.0	1073.9258	2026-07-22	False	1	1.2111	142.9102	Theme composer
Updates from major hyperscalers (e.g., AWS, Microsoft Azure, Google Cloud) regarding their AI infrastructure investments, pricing strategies for AI services, or reports on overall cloud spending trends.	Ongoing, Q3 2026	2026-07-01	2026-09-30	Changes in cloud AI infrastructure costs or a slowdown in underlying cloud investment could impact the profitability and deployment strategies of enterprise software companies, affecting their ability to integrate and monetize AI, and potentially forcing them to pass on costs or slow innovation.	Theme	theme_composer	ADBE, CRM, WDAY, NOW, U, SPGI, DDOG	7	9.1011	1.18	1.0		1.0	1073.9258	2026-07-22	False	1	1.2111	142.9102	Theme composer
Further legal proceedings, potential settlement discussions, or a trial date in the class-action lawsuit alleging discrimination in Workday's AI hiring tools.	Ongoing, Q3 2026 and beyond	2026-07-22	2026-12-31	This lawsuit could set a significant precedent for AI governance and ethics in enterprise software, directly impacting Workday's HR solutions and potentially increasing 'AI anxiety' and caution among enterprises considering AI adoption across various software categories, thus slowing monetization for multiple vendors.	Theme	theme_composer	WDAY	1	0.0001	1.18	0.92	Court/Legal	1.3	0.0097	2026-07-22	False	1	0.0007	0.0972	Theme composer
General Availability (GA) launch of a new AI-native conversational service desk experience product, which is the first of many net new AI native products.	very shortly, soon will be GA, in the weeks to come	2026-07-23	2026-10-23	This new product-led motion expands ServiceNow's total addressable market (TAM) to the Fortune 500,000, potentially driving significant new customer acquisition and revenue growth from AI-native offerings.	Ticker															NOW (ticker)	NOW_37f03749	2026-07-22	earnings_transcript
Achievement of ServiceNow's Q3 2026 financial guidance, including subscription revenues between $3.975 billion and $3.980 billion, and 20% constant currency CRPO growth.	For Q3	2026-07-01	2026-09-30	Meeting these short-term financial targets would signal continued strong execution and demand for ServiceNow's offerings, providing positive momentum and validating management's outlook.	Ticker															NOW (ticker)	NOW_45fcb136	2026-07-22	earnings_transcript
Successful development and implementation of monetization strategies for the Headless 360 platform, expanding Salesforce's addressable market.	next leg of our path to FY '30	2026-04-01	2030-01-31	This strategy aims to drive new revenue streams by allowing customers to access Salesforce capabilities through any interface. Successful monetization will positively impact long-term growth and valuation.	Ticker															CRM (ticker)	CRM_9849145f	2026-05-27	earnings_transcript
The full rollout and widespread adoption of Agentforce Coworker, making autonomous agents built into all Salesforce applications available to all customers.	as we get Agentforce Coworker live for all of our customers	2026-07-01	2026-09-30	This product is expected to significantly enhance Salesforce applications, driving increased token usage, customer adoption, and potential upsell opportunities, impacting revenue and product stickiness.	Ticker															CRM (ticker)	CRM_535edcb8	2026-05-27	earnings_transcript
Actual year-over-year growth in Billed Issuance for 2026.	Our base case assumption, therefore, starts with Billed Issuance up low to mid-single digits in 2026.	2026-01-01	2026-12-31	Billed Issuance is the primary driver for the highly profitable Ratings segment. Growth above 7% YoY would be bullish, while below 3% YoY would indicate a macro slowdown or persistent bank loan softness, impacting guidance.	Ticker															SPGI (ticker)	SPGI_6466df22	2026-02-10	earnings_transcript
Large-scale debt offerings from hyperscalers for AI infrastructure CapEx.	We expect that to continue in 2026, albeit spread more throughout the year.	2026-01-01	2026-12-31	Aggregate hyperscaler debt issuance exceeding $50 billion in H1 2026 would be bullish, providing upside to Ratings guidance and demonstrating a new source of demand.	Ticker															SPGI (ticker)	SPGI_ad8834e9	2026-02-10	earnings_transcript
Recovery in bank loan syndication volumes.	We have also seen softness in bank loan volumes in January and we are reflecting modest expectations for those volumes in our guidance as a result.	2026-01-01	2026-12-31	Continued softness in bank loan volumes could drag down overall Market Intelligence and Ratings segment margins, while a recovery would be bullish for volume-driven products.	Ticker															SPGI (ticker)	SPGI_376ae078	2026-02-10	earnings_transcript
The duration and scope of sanctions impacting S&P Global Energy's revenue.	We expect to lap those sanctions by the end of Q3 2026.	2026-01-01	2026-09-30	Sanctions are expected to create a 60 basis point headwind in 2026. An earlier-than-expected resolution or no further expansion would be positive for Energy revenue.	Ticker															SPGI (ticker)	SPGI_3ba5aae4	2026-02-10	earnings_transcript
Adoption rate for AI add-ons in Market Intelligence, specifically iLEVEL's automated data ingestion.	with the 6 months, we had nearly 20% of the iLEVEL customers opting for that add in, which is not part of the standard subscription.	2026-01-01	2026-12-31	Scaling iLEVEL AI adoption towards 30-40% by Q2 2026 would be bullish, validating AI pricing power and driving incremental revenue. Stagnation at 20% would suggest limited ROI for users.	Ticker															SPGI (ticker)	SPGI_82cd8303	2026-02-10	earnings_transcript
Progress towards and achievement of the Enterprise Data Office (EDO) goal to reduce run rate expenses by over 20% by the end of 2027.	One of our goals with the EDO is to reduce run rate expenses by more than 20% by the end of 2027.	2026-01-01	2027-12-31	This initiative is a key driver of margin expansion and improved productivity, freeing up capital for reinvestment and contributing to EPS growth.	Ticker															SPGI (ticker)	SPGI_999d6da7	2026-02-10	earnings_transcript
Salesforce achieving organic revenue reacceleration as guided for the second half of fiscal year 2027.	second half of FY '27	2026-08-01	2027-01-31	This is a critical management guidance metric. Achieving reacceleration would validate their strategy and execution, positively impacting revenue growth and investor sentiment.	Ticker															CRM (ticker)	CRM_0574a23d	2026-05-27	earnings_transcript
Achievement of ServiceNow's updated 2026 AI Annual Contract Value (ACV) target of $1.5 billion, tracking ahead of the initial target.	by the end of 2026	2026-10-01	2026-12-31	Exceeding this raised target would signal strong adoption and successful monetization of ServiceNow's AI offerings, reinforcing the bullish investment case for its AI-native platform.	Ticker															NOW (ticker)	NOW_330b8d99	2026-07-22	earnings_transcript
Completion of headcount rationalization post-acquisitions (Moveworks, Vesa, Armis) to pre-acquisition levels.	complete this cycle of 2026 and start 2027	2026-10-01	2026-12-31	This indicates successful integration and cost discipline, expected to drive operating and free cash flow margin expansion, reinforcing the company's financial strength and commitment to the 'Rule of 60' target.	Ticker															NOW (ticker)	NOW_e6ce8e31	2026-07-22	earnings_transcript
Slack achieving $10 billion in annual revenue.	in short order	2027-05-27	2028-05-27	This represents a major growth milestone for Slack, confirming its successful integration and expansion within Salesforce's portfolio, and would positively impact overall revenue and valuation.	Ticker															CRM (ticker)	CRM_f0e419cf	2026-05-27	earnings_transcript
Slack reaching a point where the number of AI agents using the platform surpasses the number of human users.	In 2 years	2028-05-27	2028-05-31	This milestone would demonstrate a significant shift towards agentic enterprise operations, validating Slack's strategic importance and potentially leading to substantial growth in usage and monetization.	Ticker															CRM (ticker)	CRM_1b0887fa	2026-05-27	earnings_transcript

NotesTable

Earnings Summary

Date	Type	Comment	Detail	Sentiment	Tickers
2026-07-22	Theme Update	The theme refresh process highlights the continuous, dynamic evaluation of AI's impact on software. It confirms the need to synthesize diverse inputs to assess if AI's disruptive potential (commoditization, agentic systems) is outpacing incumbent adaptation (AI integration, data moats). The core "AI Short '26" thesis remains under multi-faceted scrutiny, validating its ongoing relevance.	Earnings Summary	Bearish	ADBE, CRM, WDAY, NOW, U, SPGI, DDOG, HUBS, PAR

Constituents

DDOGT13.5%
— Datadog, Inc.
NOWT2
— ServiceNow, Inc.
ADBET3
— Adobe Inc.
CRMT3
— Salesforce, Inc.
HUBST3
— HubSpot, Inc.
PART3
— PAR Technology Corporation
SPGIT3
— S&P Global Inc.
UT3
— Unity Software Inc.
WDAYT3
— Workday, Inc.
ADSKT3
· no notes yet
BRZET3
· no notes yet
MNDYT3
· no notes yet
RPDT3
· no notes yet
SAPT3
· no notes yet
TEAMT3
· no notes yet

AI Short '26: AI-Obsolete Software (view performance)