The same AI Narrative, Very Different Software Businesses
The AI sell-off in software has been swift and broad. Investors are asking whether software can now be built more cheaply, whether customers will need fewer licences, and whether margins will be squeezed as companies race to embed AI into their products.
Those are fair questions. But the market’s response has been far less thoughtful than the questions themselves. Software has been sold as a category, as though every business faces the same threat at the same speed.
Australia: switching costs are real
Bravura (ASX: BVS) is a good example. Its software sits at the core of wealth managers and super funds, supporting functions where downtime and errors are not acceptable.
AI may make it easier to build competing products. That does not make it easy to replace a system that is embedded in a client’s operations, tied into multiple workflows, and costly to move away from. In these cases, the key question is not whether the software can be rebuilt, it is whether customers will actually switch.
The UK: low-cost, mission-critical software looks safer
Sage (LSE: SGE), a UK-listed accounting software provider, highlights a different kind of resilience. Its software sits at the centre of payroll, tax and reporting, yet costs little relative to the value it delivers. That makes it highly sticky.
If a product is both important and inexpensive, customers have less reason to take the risk of changing providers. That does not make these businesses immune, but it does make disruption slower than current market pricing seems to assume.
Japan: different fundamentals, same sell-off
Japan stands out because many of its software businesses are still earlier in the digitisation cycle. Customers are still shifting onto modern systems, growth remains strong, and earnings are often cleaner than in the US, with less reliance on stock-based compensation and, in many cases, stronger cash positions.
Despite that, these stocks have been sold off with the rest of global software. That seems too simplistic. In a market where the AI risk is less immediate and the structural growth story is still intact, the sell-off, from a Forager perspective, looks more like a spillover from global fear than a reflection of deteriorating fundamentals.
What matters now
The point is not that AI will not matter. It will. But its impact will vary widely across the sector. For Forager, the framework is simple: how important is the product, how embedded is it in customer workflows, and how hard is it to replace?
If the market is calling this judgment day for SaaS, the real question is which businesses will make it through the trial.
To hear the full discussion, tune in to the full Stocks Neat podcast episode.
Explore previous episodes here. We’d love your feedback. If you like what you’re hearing (and what we’re drinking), be sure to follow and subscribe.
You can listen to Stocks Neat on:
Spotify
Apple
Buzzsprout
YouTube