HSBC: Software is transforming artificial intelligence

Investing.com - HSBC states that software will continue to be the core mechanism for the world’s largest companies adopting artificial intelligence. The bank believes that although foundational models are making rapid progress, AI is unlikely to replace enterprise software.

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Analyst Stephen Bersey wrote, “Software will become the main mechanism for the diffusion of AI in the world’s largest companies,” adding that 2026 marks the “beginning of monetization in the software sector.”

HSBC believes that foundational models “have inherent flaws” and are not suitable for “direct replacement” of major enterprise platforms.

The bank states that while these models may be suitable for narrow applications like image creation or small-scale apps, “it’s not realistic for most high-fidelity, enterprise-level platforms.”

Bersey added that encoding shifts the design burden onto developers, and major AI model players “have almost no experience in creating ‘enterprise-grade’ software,” meaning they will have to start from scratch in highly complex environments.

HSBC notes that enterprise software has already evolved to “almost zero errors, high throughput, and reliability,” and points out that this critical intellectual property cannot be trained on public internet data.

Even if new entrants can build comparable code, it is difficult to replace existing companies because they operate core business functions responsible to shareholders.

HSBC believes that mature software vendors are best positioned to commercialize AI because they have already embedded “refined intelligent agents” into their platforms in a controlled manner, overcoming the limitations of foundational models.

The bank believes that as monetization accelerates, these enterprise vendors will benefit the most.

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