Top
Best
New

Posted by petethomas 20 hours ago

Why software stocks are getting pummelled(www.economist.com)
118 points | 161 commentspage 3
mempko 4 hours ago|
This article crystallizes something I witnessed firsthand last week.

Overheard a guy at a restaurant explaining how he builds phone apps with AI and no coding experience. When asked how he verifies the code works, he said he pastes it into a different AI to explain it.

That's the "slopware" problem in action. The code compiles. It might even work. But there's no understanding of what it's actually doing, no ability to debug when it breaks in production, no awareness of the technical cruft accumulating with every prompt. That's a problem for people creating software for others and is a huge opportunity for software developers to take prototypes and build real stuff.

Does anyone remember the RAD days of the 90s?

On the flip side, for people making software to solve THEIR problems, they don't need to make anything production quality. Its for a single user, themselves! Maybe the LLMs are good enough now that people don't need to buy or subscribe to software that solves trivial problems as they can build their own solutions. Maybe the dream of smalltalk, hypercard, and even early web where anyone can use the computer of what it was meant for is finally here?

christkv 4 hours ago|
Thats fine Ill charge him 500 bucks an hour to fix it if it has success and he runs into not being able to maintain it
christkv 4 hours ago||
The cleanup needed after this by senior developers will be epic.
falloutx 4 hours ago|
Most of the these companies wont survive because of thier stupidity anyway.
agentultra 3 hours ago||
... because they've been driven by years of bad leadership, monopolistic scheming, and investor speculation?

AI is just the latest symptom, IMO.

We normalized growth over revenue. Governments around the world have been pressured by Big Tech to dismantle anti-trust and regulation. We glorified shipping slop, suppressing unions, and pretending like programmers were temporarily embarrassed founders.

The stocks are dropping because our system can't sustain these practices, IMO.

elorant 4 hours ago||
Because the bubble has began to burst.
wtp1saac 4 hours ago||
Certainly no investor, but my own feelings:

AI replacing vendors feels like a strange risk, though I'm not sure if vendors view things through a technical lens. Security concerns and service maintenance alone, IMO, makes writing internal software a large proposition - one that I would want a trusted vendor if it wasn't a hobby project and I could just afford that. Particularly if that data being lost or broken would severely harm a business.

There are also already frameworks in languages like Python that make putting up an internal website very, very simple. If you don't need production grade, you might have already had a pretty low barrier to entry, if you have the skills to figure out how to host the service you just vibe coded, you can probably figure out some basic django to throw data in its ORM, or find libraries that do the work for you.

AI does feel in those technical ways to be an overstated risk, to me at least.

Far more worrying to me is the breakdown of the USA and its role. We are going to have blocs of software and hardware entirely from competing geopolitical regions, which may not be able or authorized to communicate with one another. Any businesses in the USA with significant CA or EU marketshare right now will decline in value to the degree client companies choose, or are told, to stop using USA systems.

(My own governor in California outright antagonized the Europeans at Davos calling them "pathetic" while telling them to get tough on Trump, which means in practice, stop using US, meaning yes California, tech goods and services. A lot of revenue from tech comes from overseas, and we are going to lose at least some portion of that. Particularly in California which already has budget problems with what revenue it's got. Stunning how even The Guardian treated those remarks as "tough" and not insane and self-destructive... sadly it's nothing compared to the worst of the US right now.)

So, where do you throw investment right now? To the US where the marketshares will likely decline, and the political and trade environment is insanely uncertain, but there is momentum on AI and generally decent hardware design, and the existing software companies and knowledge? To the EU or Canada where maybe a nascent software industry will take hold, or perhaps American companies will relocate talent if the USA collapses into civil conflict? To China, if they end up becoming a hegemon, given their strength in hardware and their growing efforts to invest in software alternatives?

I suppose I read markets don't react to "tensions," and maybe it is unprecedented to modern memory, but I think about these things more than AI.

wtp1saac 4 hours ago|
I would add: open source throws additional curveballs. The EU wants to push for open source, and that is admirable, but I wonder what the sustainable funding model would be, and how that could attract attention. I wonder about business models and ability to generate return on investment.

I would think the saner solution is allowing proprietary companies, but imposing technical standards which companies collaborate on, enabling interoperation. Am I mistaken, that the EU is trying to do this with the DMA? I have heard general overtones, but I haven't looked at it very closely, and our media doesn't cover EU tech regulations in much detail in the US, though in a decent world it would, I wish it would.

dheera 5 hours ago||
It always amuses me because the people complaining about stocks going down are always the same people who are causing them to go down. Losing money was a choice that those people collectively made. They could have chosen to act differently, in light of the optimistic long-term future.
dasil003 5 hours ago|
No doubt! Collective action is a solved problem! Why do people do things other than the obvious Right Things we can all agree on? Must be some kind of mass psychosis…
llmslave 5 hours ago||
Software will be easy to create, which will kill moats and margins on existing products. The game is up for pure saas. Smart money started pricing this in one year ago
skissane 5 hours ago||
For a lot of SaaS firms, a big part of their value is the domain knowledge and best practices encoded in the software.

Current AIs often do a bad job of that. Sure, they know a lot of it. But they also get a lot of it wrong, and can’t tell the difference between genuinely good advice, and advice that sounds good but is practically worthless or even harmful.

(Of course I’m biased since I work for a SaaS firm. But I’m talking about them in general, not just my current employer.)

llmslave 5 hours ago||
ai will know the domain knowledge
skissane 4 hours ago|||
I'm not sure how realistic it is to expect AIs to get detailed hands-on domain knowledge. A lot of this stuff humans learn by doing and by experience. AI models don't learn anything by doing and experience. A model vendor can't possibly encode all that experience into their training data, and even if they try, the problem is a lot of it will be vertical-specific, country/region-specific, and it is forever changing. SaaS firms have professional services and sales consulting teams who are constantly talking to customers about their actual business problems, and they feed that accumulated wisdom back to product management and data science, who in turn help engineering encode it into the product.

From what I've personally seen in SaaS AI agent development – if you try to build an AI agent to give customers advice in a particular business domain, you need to do a huge amount of work validating the answer quality with actual domain experts, and adjusting the prompts / RAG documents / tool design / etc to make sure it is giving genuinely useful advice. It is really easy to build a system which generates output which sounds superficially good, but an actual domain expert will consider wrong or worthless.

fragmede 2 hours ago|||
not if we don't tell it.
idle_zealot 5 hours ago|||
Was the hard part ever really the software, though? It's the Service part of SaaS that seems to provide the moat. Lock-in, habits, workflows, integrations, and trust. And don't discount the appeal of making some part of your operations "someone else's problem." Could you hire engineers or use an LLM to make your own Google Docs? Probably, yeah, but would that be worth the headache of being responsible for a bespoke internal document system?
jonathaneunice 4 hours ago|||
You might think you can, for a while. Been there, done that. But you probably can not do so sustainably in most cases. Even if you could, would you really be better off building vs. buying? Outsourcing development, operations, and maintenance is almost always the better choice, letting you focus on the things you do uniquely, differentiably, or meaningfully better.

"We have this awesome internal version of Docs that we're responsible for fixing, upgrading, and doing support for" is not the flex "AI can code anything!" aficionados think it is. Especially when you also have similar internal versions of Sheets, Jira, Slack, GitHub, Linux, Postgres, and 100 other tools.

bryanlarsen 4 hours ago||||
The article is about SAP, Salesforce, etc.

Making your own Google Docs is stupid unless your company's core business is document management.

OTOH Replacing SAP with a bespoke system will make a lot of sense for many companies.

SAP is already the worst of both worlds. It'll have been highly customized for your flow so you've got all of the headaches of bespoke software and all of the headaches of SaaS. And unlike Google Docs, it'll be highly integral to your core business.

cedilla 4 hours ago|||
Companies pay millions and millions to get away from bespoke software, but not simply because of the costs. Companies want to do their core business, they don't want to also be a software enterprise, and assume all the risks that entails. Even if AI makes creating software 10 times less expensive, that doesn't really change.
bryanlarsen 4 hours ago||
SAP is bespoke software.
louiereederson 3 hours ago||||
you are aware of the long history of organizations being absolutely screwed by bad erp implementations right? nike's 2001 issue, the horrific birmingham oracle implementation, avon, etc.
bryanlarsen 2 hours ago||
Those are examples of very good reasons to ditch i2, Oracle, SAP, et cetera.
calvinmorrison 4 hours ago|||
what do you mean SAP? like the ERP system?

I would absolutely NEVER steal or rewrite that. So much finanical stuff is baked into the business logic that impacts finance, regulations, hr, etc.

No do not roll your own ERP core.

Roll everything else

airstrike 5 hours ago||||
the problem is an AI can figure out habits and workflows pretty seamlessly. lock-in is artificial and loses power when it's really easy to make a competing app for large swaths of web apps.

integration is likely the most valuable part of the puzzle, but it's also prone to disruption

I think all that's left are like <50 apps each with their own very bespoke and "power user"-ready interface

llmslave 5 hours ago||||
yes, if it takes one month to build something that took 9 months previously, it completely changes your go to market strategy
senko 5 hours ago|||
> Could you hire engineers or use an LLM to make your own Google Docs

Or you can just ask your LLM to install https://github.com/CollaboraOnline/online

Between open source, LLMs, and SaaS vendors getting greedy and privacy invasive, the total pain minimization calc might shift for some orgs.

idle_zealot 4 hours ago||
Even then, I would expect most orgs would want to contract out to a company that manages an instance of that open source software. That management company could undercut bigger players because they don't need as many engineers working on features. I don't see where the LLM comes in and shifts the calculus here.
tjr 4 hours ago|||
What would be some examples of some current software products for which you expect the game is up?

Are there any software products that you think will survive?

Hamuko 5 hours ago||
Can't wait for every hospital to create their own patient record system, every accounting office to create their own accounting software, every car service to create their own timebooking solution, etc.
Supermancho 5 hours ago|||
> Can't wait for every hospital to create their own patient record system

Having worked in healthcare, this is the current state (per provider, not physical building).

ncruces 5 hours ago|||
We go from left-pad to everything vibe coded. No one vets deps, no one vets vibes. Zero common sense.
larodi 4 hours ago|
No, they dont distrust AI, they now may start to distrust all the big service providers that are likelty to eventually be eradicated by AI now that everyone can prompt a browser. This perhaps will also finally kill Microsoft Access, which is the closest to AI doing the work instead of you for so long. Then all the do-it-yourself enterprise-grade systems became SAAS, so its right for SalesForce and friends to go fck themselves once in a lifetime for standing in the way of actual software ownership.

I know, you are saying - they will adopt. Perhaps, while also cutting 40% (if not more) personnel during the pivot, and perhaps also by facing more challenges by faster moving competition.

Like, look for a second - why didn't Google create what the perplexity newsfeed is, given they actually like did 10 years ago and then close to nobody was using it. The equilibrium seems super unstable. What happens if a smart kid devices way to compress this information 10x times faster. This immediately means neural chips stall.

This volatility is something, not a joke. The second order effects may be unforseeable in an unparalleled way. Besides, the Luddites organize much better in 2026 given reddit etc.