SaaSpocalypse Unveiled: Why AI-Driven Software Growth Is Testing Investor Patience

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The market’s relationship with software has seems to be changing, and quite fundamentally at that. This week, Wall Street delivered a sobering message: enterprise software is no longer being valued on its potential to integrate AI, but on its ability to prove immediate, tangible ROI.

The recent "SaaSpocalypse" has been a clinical correction for a sector that has long relied on headcount-driven growth. Salesforce saw a significant valuation pull-back in a single session despite meeting earnings targets, while Workday and Snowflake faced double-digit declines as investors questioned the durability of the "per-seat" licensing model. The tech sector is discovering that a $37.5 billion quarterly investment in AI infrastructure is a difficult sell if it leads to a contraction in the very user bases that drive software revenue.

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Salesforce Under Siege

Salesforce has recently become the "poster child" for the SaaSpocalypse, not because its business is failing, but because its core growth engine is colliding with the reality of AI.

Despite reporting solid numbers—including a Q3 revenue beat of $10.3 billion (up 9% year-over-year)—Salesforce stock took a massive hit. As of early February 2026, the stock has retreated over 25% from its recent highs, bottoming out near $185–$187.

It seems that the premium once paid for Salesforce's predictable subscription model is shrinking as investors worry that the old way of selling software is structurally broken. In fact, the biggest threat to Salesforce is its own business model. For two decades, Salesforce grew by selling "seats" (licenses per human user).

• The AI Contradiction: Salesforce’s new flagship product, Agentforce, is designed to create AI agents that automate customer service and sales tasks.

• The Investor Fear: If one AI agent can do the work of 10 customer service reps, a company might cancel 10 of its Salesforce seats and replace them with one (cheaper) AI license. This creates a "cannibalization" effect where Salesforce’s innovation could actually shrink its total user base.

To add to the fears, earlier this week, reports surfaced that Salesforce laid off nearly 1,000 employees. These cuts targeted marketing, product management, and even parts of the Agentforce AI team. While CEO Marc Benioff has been vocal about "rebalancing" headcount as AI automates routine tasks, and could potentially margins ahead of the fiscal year-end, the news has created a specialized kind of anxiety among market participants.

According to some, like William Blair analyst, Jason Ader, this anxiety could actually be overblown. While AI could reduce the number of traditional licenses sold per human user, it also opens a new revenue stream: companies may pay a premium for AI-enabled automation that increases efficiency and output.

In other words, Salesforce isn’t necessarily losing business—it’s transforming it. The concern isn’t about declining demand for Salesforce products; it’s about a shift in how value is delivered and monetized.

Cisco Also Feels The Heat

Earlier this week, Cisco Systems became the latest high-profile name to fall victim to the "SaaSpocalypse," proving that even the backbone of the internet isn't immune to the violent repricing of software growth. The stock had plunged from $87 to about $74 in just a three day window:

Despite a decades-long effort to shed its image as a "legacy hardware" dinosaur, Cisco’s pivot into a software-first powerhouse—headlined by its $28 billion acquisition of Splunk—has placed it directly in the path of a market currently allergic to enterprise software volatility.

The trigger for the selloff was a classic case of a "boring" transition meeting a "panicked" market. While Cisco beat fiscal Q2 2026 expectations, the underlying mechanics of its software shift spooked investors:

• The Subscription Trap: Like the SaaS giants before it, Splunk is navigating a painful transition from one-time licenses to cloud subscriptions. This "SaaS-ification" resulted in dismal-looking growth in Security (down 4%) and Observability (flat), confirming fears that the transition is cannibalizing near-term revenue.

• The Valuation Gap: Even after an 11% single-day plunge, Cisco remains an expensive bet compared to its peers. With a PEG ratio of 2.28, it sits at a premium over faster-growing rivals like Arista Networks (1.82), which is perceived to have a "cleaner" AI story without the legacy software baggage.

Strategy in Focus: Deep Tech

There’s fear-based repricing across the entire SaaS and deep tech sector right now. The market often fails to differentiate between winners, neutral players, and actual losers—and that creates asymmetric opportunities for disciplined investors.

That’s the premise behind the Deep Tech Innovators Thematic Investing Strategy—live and designed for long-term growth in transformative tech. Instead of treating all software and AI stocks equally, this strategy targets high-quality deep tech leaders across AI, semiconductors, cybersecurity, and cloud computing.

Financial strength, industry positioning, and upside potential determine custom portfolio weights, ensuring the companies most likely to thrive from AI tailwinds dominate allocations.

The strategy invests in a curated list of 30 proven deep tech companies, rebalanced every 30 days, turning panic-driven mispricing into long-term growth potential. Current positioning includes Microsoft, Salesforce, Oracle, Zscaler, and SentinelOne—leaders with durable cash flows, high margins, and AI-ready business models.

When the market panics, this systematic, fundamentals-first approach lets you capture upside while others are selling blindly.

Also live: 

• Next-Gen Data Infrastructure Thematic Investing Strategy – targets companies powering cloud computing, data storage, networking, and large-scale data centers. Invests in a curated list of industry leaders with 30-day rebalancing, designed to capture long-term demand for advanced global data systems.

• Robotics & Automation Advancements Thematic Investing Strategy – invests in companies advancing robotics and automation across manufacturing, healthcare, logistics, and defense. Uses custom weighting based on financial strength and tech positioning, with 30-day rebalancing to benefit from accelerating automation adoption worldwide.What to Watch

In times of SaaS AI panic, disciplined exposure to high-quality deep tech companies turns fear into opportunity. Diversified, fundamentals-driven strategies position investors to capture outsized upside as the market recalibrates.

— Surmount Markets Team