Software stocks have become a crucial battleground for investors lately, as the market struggles to evaluate the potential impact AI will have on the industry. SA analyst Jack Bowman has discussed a framework for evaluating players in this industry, distinguishing between “road builders” and “tollbooths.”
According to Bowman, this bifurcation helps explain why companies like Salesforce (CRM) and Adobe (ADBE) are being sold off while MongoDB (MDB) and Palantir (PLTR) maintain strength.
“Road builders are these companies that produce dashboards. They’re just made for humans to use as a tool,” the analyst explained on a recent episode of Seeking Alpha’s Investing Experts Podcast. “And then you’ve got tollbooths, the companies that provide databases and tools that are bot-callable for AI to actually use in their workflow. These are not replaceable because the AI actually needs them.”
The concern that AI could replace knowledge workers affects road builder companies directly, Bowman argued. However, tollbooth companies benefit regardless of whether humans or AI agents are the end users.
“The road builders, I think are gonna get killed,” he said. “I don’t know how they recover if the AI narrative is correct and AI tools will replace a lot of knowledge workers. Of course, if that’s wrong, then Salesforce is at the greatest sale of a century.”
Beyond the companies mentioned by Bowman, a large number of software companies have come under scrutiny in recent weeks, amid what’s become known as the “SaaSpocalypse,” a recent selloff in Software-as-a-Service and technology stocks driven by fears that artificial intelligence will disrupt traditional software business models.
Here are some other tickers that have been discussed in this framework recently by Seeking Alpha analysts: (SNOW)(DDOG)(SHOP)(HUBS)(FRSH)(WDAY)(INTU)(LZ)(CRWD)(NET)(FTNT)(NOW)(ADSK).
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