UBS's report indicates that while large language models are not a direct threat to the enterprise software market due to differing cost structures and revenue expectations, the rise of AI-native startups poses a significant challenge. Incumbent software vendors must decide between enhancing existing SaaS products with AI or completely rebuilding their offerings, which introduces execution risks and uncertainty in competitive positioning. Despite solid earnings reported by software companies, market concerns about long-term value in the face of AI disruption have overshadowed short-term performance, leading to a reduction in target prices.
