AI SaaS investing

Software stocks are trading at P/E ratios at ten-year lows while their current fundamentals remain strong. That is precisely the signature of a market repricing terminal value, not current earnings. Whether it is overdone depends on whether the next wave of earnings calls shows actual churn or accelerating growth despite the fear.

Classic software has hit its “late maturity” phase. TAMs have been exhausted, competition is up, and the entire industry’s growth rate will collapse, eventually to that of GDP growth, faster than most think. Because of this, the entire sector should trade on GAAP P/E multiple, like the other “late maturity” industries facing disruption.