This week: we look at the reset in SaaS valuations and how AI is shifting power across the enterprise software stack.

AI in Action

The AI Expectations Reset [Software/Market]

The AI rally in software is moving from imagination to evaluation. Over the past two weeks, enterprise software stocks have fallen sharply, pulling much of the SaaS sector lower with them. Recent earnings across major vendors reset expectations that had climbed quickly alongside AI enthusiasm. Growth remains visible. What has been harder to show is clear acceleration. As guidance met elevated assumptions, multiples compressed. This looks like a recalibration of expectations rather than a break in enterprise demand.

Investor standards have shifted. The conversation has moved from capability to cash flow. AI features continue to expand across platforms, yet monetization is still early and uneven. Markets want durable revenue expansion, not pilot programs or bundled upgrades that are difficult to model. Defensibility is under closer scrutiny. Core systems remain embedded in compliance and operational control. That foundation has not disappeared. The uncertainty sits higher in the stack. If general AI becomes the primary interface through which work flows, pricing power may migrate toward whoever controls that layer. Enterprise AI also carries operational weight. Agents require governance, monitoring, and ongoing refinement. Adoption scales deliberately. Revenue ramps follow the pace of risk management. Building internal agentic workflows offers flexibility, but it rarely removes cost. It shifts it into maintenance and oversight that many organizations underestimate.

This marks a transition in the cycle. The first AI rally priced imagination. This phase prices execution. Investors are beginning to separate vendors that can demonstrate repeatable monetization, sustain defensibility, and operationalize AI without escalating complexity from those still leaning on momentum. That likely means greater dispersion across software stocks and sharper scrutiny on earnings calls. Enterprise adoption will continue, but through measured rollout rather than sweeping transformation.

Bits of Brilliance

The Intelligence Layer [Software/Architecture]

For decades, enterprise software resembled a skyline of vertical towers. Each tower owned its workflow. Customer relationship management systems tracked sales pipelines and client interactions. Enterprise resource planning systems ran finance, supply chains, and core operations. Data platforms lived alongside them. Value concentrated where people worked, inside the applications, because that is where seat pricing attached and where switching costs accumulated.

AI behaves less like a new tower and more like a horizontal layer stretching across the skyline. A general model can interpret intent, draft outputs, summarize data, and orchestrate tasks across multiple systems. Work no longer has to begin in one dashboard. It can begin with a prompt. When that happens, attention shifts upward. The visible interface may no longer be the CRM screen or the ERP menu, but the intelligence coordinating them. The towers remain essential. Systems of record still anchor compliance and control. Gravity, however, starts to move toward the layer that can access and act on data across towers. In practice, AI often ends up differentiated by the data it can access. The more unique, proprietary, and deeply embedded that data is, the harder it becomes for the intelligence layer to feel interchangeable.

For enterprise leaders, this reframes familiar tradeoffs. Build versus buy now includes maintenance economics. Internal agentic workflows offer flexibility, yet they introduce ongoing governance, monitoring, model updates, and security oversight. Cost does not disappear. It shifts from vendor invoices to internal headcount and operational complexity. Vendor decisions become less about feature breadth alone and more about data ownership, integration depth, and who absorbs long-term maintenance burden. As AI matures inside the enterprise, the strategic question is not whether the towers survive. It is where gravity settles, and how much it costs to hold it there.

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