TL;DR

HSBC has pushed back against this month’s “SaaSpocalypse” sell-off, arguing that AI will not displace enterprise software but will instead be subordinate to existing platforms. The bank maintains Buy ratings on Oracle, ServiceNow, Salesforce, HP, and CrowdStrike, calling current valuations “historical lows.”

Why HSBC thinks the sell-off is overdone

Software stocks plunged earlier in February amid fears that AI could make SaaS business models obsolete. HSBC’s analysts responded with a note arguing the threat is overstated for three reasons.

First, consumer AI companies like OpenAI and Anthropic have “little to no experience” creating enterprise-class software and would be “architecting from scratch in unfamiliar highly complex areas.” Second, using AI to build in-house replacements is neither practical nor economical for most businesses. Third, even free vibe-coded alternatives would struggle to displace vendors that run daily operations at global companies.

“Within a full-blown enterprise application, we think AI is destined to be subordinate to the overall software platform,” the note stated. “The software vendors themselves” are best placed to use AI to improve on existing products.

The investment case

HSBC sees sector valuations at historical lows despite what it calls strong demand momentum. “As profitable as AI has been for the hardware/semiconductor sectors, we see the lion’s share of value being generated within the software sector — a sector that has been planning and building agentic AI for the past two years, with a kick-off in 2026.”

The bank holds Buy ratings on Oracle, ServiceNow, Salesforce, HP, and CrowdStrike. It rates Twilio, SAP, Fortinet, and Cisco as Hold, and has Reduce ratings on Palo Alto Networks, IBM, and CoreWeave.

Looking forward

Whether HSBC’s thesis holds depends on how quickly AI-native competitors can learn enterprise sales and compliance. But the argument that incumbents with existing customer relationships and data integrations are better positioned than newcomers building from scratch has history on its side.