Hello and welcome to Eye on AI…In this edition: the ‘SaaS Apocalypse’ isn’t now…OpenAI and Anthropic both launch new models with big cybersecurity implications…the White House considers voluntary restrictions on data center construction to save consumers from power bill sticker shock…why two frequently cited AI metrics are probably both wrong…and why we increasingly can’t tell if AI models are safe.
Investors need to take to the couch. That’s my conclusion after watching the market gyrations of the past week. In particular, investors would be wise to find themselves a Kleinian psychoanalyst. That’s because they seem stuck in what a Kleinian would likely identify as “the paranoid-schizoid position”—swinging wildly between viewing the impact of AI on established software vendors as either “all good” or “all bad.” Last week, they swung to “all bad” and, by Goldman Sach’s estimate, wiped some $2 trillion off the market value of stocks. So far this week, it’s all good again, and the S&P 500 rebounded to near record highs (although the SaaS software vendors saw only modest gains and the turmoil may have claimed at least one CEO: Workday CEO Carl Eschenbach announced he was stepping down to be replaced by the company’s cofounder and former CEO Aneel Bhusri.) But there’s a lot of nuance here that the markets are missing. Investors like a simple narrative. The enterprise AI race right now is more like a Russian novel.
At various times over the past two years, the financial markets have punished the shares of SaaS companies because it appeared that AI foundation models might allow businesses to “vibe code” bespoke software that could substitute for Salesforce or Workday or ServiceNow. Last week, the culprit seemed to be the realization that increasingly capable AI agents from the likes of Anthropic, which has begun rolling out plugins for its Claude Cowork product aimed a particular industry verticals, might hurt the SaaS companies in two ways: first, the foundation model companies’ new agent offerings directly compete with the AI agent software from the SaaS giants. Second, by automating workflows, the agents potentially reduce the need for human employees, meaning the SaaS companies can’t charge for as many seat licenses. So the SaaS vendors get crushed two ways.
But it isn’t clear that any of this is true–or at least, it’s only partly true.
