SaaS valuations normalize as AI reshapes growth assumptions
Recent 40% drawdowns in software stocks have reset valuations to more reasonable levels, according to Luca Ferrari. He argues that established SaaS companies retain durable competitive advantages that AI cannot easily replicate.
Luca Ferrari addressed the recent correction in software-as-a-service valuations, noting that historical pricing was often based on unsustainable growth assumptions, such as 12% organic growth sustained for 15 years. He stated that the recent 40% drawdowns have reset these valuations to a more reasonable range. Ferrari argued that while artificial intelligence has provided an excuse for investors to re-evaluate these models, it does not threaten the existence of established SaaS companies.
He contended that software replication has always been cheap relative to market share value. For instance, replicating Salesforce or WeTransfer is technically feasible but commercially unviable due to first-mover advantage, brand strength, network effects, and proprietary data. Ferrari cited Eventbrite's 90 million monthly users and Komoot's proprietary path data as examples of moats that AI cannot easily replicate. He acknowledged that AI may shift customer acquisition dynamics and hurt margins, but maintained that most digital products remain well-protected. He added that enterprise software spend, which accounts for 8% to 10% of total spend, remains a stable market. Ferrari concluded that the valuation correction was justified by prior overvaluation rather than AI disruption.