HSBC's "Contrarian View": Software Will Consume AI, Now Is a Good Time to Buy the Dip

Can AI code disrupt SaaS? HSBC’s answer is quite the opposite.

According to Chasing Wind Trading Platform, on February 24th, HSBC’s U.S. Technology Research Director Stephen Bersey and his team released a report titled “Software Will Eat AI,” which presents a contrarian view.

In the current wave of “AI disruption and panic trading,” HSBC clearly states that software will not disappear; instead, it is the key way for the world’s largest companies to “controlably leverage AI.”

HSBC summarized their judgment with a contrasting statement: “Hardware/Semiconductors are already strong enough, but software will be even better.” Their logic is: what enterprises truly need are systems that are controllable, auditable, and repeatable, rather than “talking models,” and this is precisely where software platforms excel.

• Enterprise software will not be threatened by AI; instead, AI will be embedded into software platforms.
• Enterprise software vendors have already completed heavy tasks such as design, intuitive programming, and embedded agent testing.
• Valuations in the software sector are at historic lows, and the industry is poised for large-scale expansion.

Innate Flaws of Large Models and Enterprise Barriers

The biggest current market concern is that AI writing code itself (Vibe-coding) will significantly lower the barriers to software development, allowing startups to easily disrupt existing SaaS giants.

HSBC firmly refutes this. The report points out that, from a technical perspective, foundational AI models have “innate flaws.” AI is inherently nondeterministic, and may give different answers or make mistakes on the same problem.

This is fatal for enterprise applications. “The world is used to repeatable, auditable, error-free software platforms in daily operations, but foundational models lack these attributes.” HSBC emphasizes that expecting AI to perform a “full migration and replacement” for high-fidelity enterprise platforms is unrealistic.

Moreover, enterprise software has evolved over decades to achieve extremely high throughput and reliability. It contains vast amounts of critical and proprietary intellectual property (IP), which cannot be trained on public internet data. HSBC straightforwardly states: “If you don’t know what code you’re writing, vibe-coding is almost useless.”

It’s like a pharmaceutical company wouldn’t design chips or smelt steel for internal use. Companies have long abandoned writing their core IT systems themselves because it defies basic economic principles.

They quickly realize that developing, maintaining, and staffing these systems internally is very costly; investing heavily in building large platforms only to serve a single use case (their own) is highly inefficient. Conversely, buying from software vendors with expertise in development, maintenance, and staffing is much more economical, as these costs are spread across thousands of customers.

Who Will Write the Best AI Software? The Traditional Software Giants

Since startups and large model providers lack experience in building “enterprise-grade” complex architectures, who is best suited to generate better software with AI?

HSBC provides a very confident answer: “Of course, the software vendors themselves.”

The logic is very clear: established giants like Salesforce, Oracle, ServiceNow, and Microsoft possess deep domain expertise, stable sales channels, and customer trust. More importantly, they have been embedding refined intelligent agents (Agents) into their extensive platforms using the same AI programming tools.

AI’s role is to be “dimensionality-reduced” and “domesticated.” HSBC makes a vivid analogy: AI is responsible for creatively analyzing and producing intelligent data, but this data must be handled, stored, checked, and executed by deterministic software stacks.

“Most enterprise software will not be threatened by AI; instead, AI will be domesticated within application stacks through agents, creating enormous value in the process.”

2026: The Year of Software Monetization, Valuations at Historic Lows

From an investor’s perspective, technological logic must ultimately translate into performance guidance and market opportunities.

HSBC provides a clear timeline: major software giants have already begun designing and beta testing embedded AI agents in 2024, and the technology is now mature and being promoted to large global clients.

“We believe 2026 will be the kickoff for software monetization.” HSBC points out that this is also the main mechanism for the world’s largest enterprises to consume AI, which will drive exponential growth in AI inference demand.

Regarding market investment pace, HSBC delivers a resounding conclusion: “Although hardware and semiconductor sectors have performed well, software will be even better (As good as Hardware/Semi has been, Software will be better).”

HSBC believes AI is a technology, but “companies rarely buy technology; they buy solutions to business problems,” and these solutions can only come from an infinitely flexible software stack. In this ecosystem that creates over $100 trillion in global GDP, traditional software giants are the core beneficiaries of unlocking AI’s value potential.

Currently, the total potential market (TAM) for software is on the verge of a 5-10 year period of large-scale expansion. However, market misperceptions have led to software sector valuations at historic lows. HSBC suggests that before valuations are reassessed, now is an ideal time to establish or expand positions in the software sector.

This insightful content is from Chasing Wind Trading Platform.

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