Almost a year ago, Michelle Miller co-authored a visionary study that warned that the software industry would be squeezed by the rise of generative AI.
Now, software stocks are plummeting for many of the same reasons Miller and his colleagues at AlixPartners laid out in April.
So I reached out to Miller again this week to see how she sees things moving forward. As co-leader of AlixPartners’ Enterprise Software practice, she’s obsessed with this, so keep an eye out.
Business Insider: Why have software and SaaS stocks fallen so much in recent weeks?
Michelle Miller: We believe there are several factors behind the weakness in software/SaaS stocks in recent weeks, but these factors have been putting pressure on the software industry for some time and are now accelerating. These include persistent fears of AI disruption, outdated pricing models, and general macro uncertainty, as well as concerns about AI-based valuation frameworks and valuation premiums. Previously, enterprise software company valuations were driven by investors’ growth expectations. Currently, software growth is being challenged by the AI-driven forces mentioned earlier, and we believe the multiplier is decreasing.
When it comes to trending news (such as Anthropic’s Cowork), this is another notable example of AI tools lowering barriers to entry, gaining momentum, and disrupting existing workflows.
Can you boil this threat down to simple ideas that non-technical people can understand?
AI won’t eliminate the need for software companies, but they will need to prove they can meet their growth challenges.
Software companies will need to learn how to navigate a new era in which business economics are fundamentally different. AI is forcing changes across software development, AI governance and data security, go-to-market operations, pricing models, valuation frameworks, and business structures. We believe that the software companies that master these transitions will determine the winners of the next era, and those that cannot adapt will be sidelined as the fundamentals of the industry are reassessed.
Is there a broader meaning beyond weirdness? Moltbot chat online? What are the significant implications of this tool (Now called OpenClaw)?
AI continues to capture the imagination in new ways and push the boundaries of advancement. As for Moltbot and Moltbook, they are the latest entrants to validate this capture of the imagination, demonstrating the incredible speed at which AI technology is advancing.
These are large-scale experiments that I see gaining a lot of attention, especially in the AI community. These represent the very early stages of interaction between agents and highlight the productive power that would be readily available to a single user using modern agent systems. This raises serious questions about AI governance and data security for companies dealing with open source and shadow AI concerns. So-called “trust infrastructure” remains an afterthought rather than a fundamental function, posing a significant barrier to widespread adoption of AI.
How are companies changing the way they use software? Are they using AI tools instead in some situations? Can you share an impactful example?
Companies are piloting AI tools across their organizations. In product and engineering, companies are leveraging AI-powered coding to create conversational interfaces and develop trust infrastructure. In go-to-market functions, companies are introducing AI sales tools and new pricing models. Companies are also using AI to enhance common management functions such as finance, human resources, and corporate IT process automation.
Today, over 30% of technology companies’ workflows already include AI tools, and this is expected to increase significantly over the next five years. However, the majority of GenAI proofs of concept have not moved into production, and 75% of all AI deployments are expected to fail. Winners in 2026 will stop phased pilots and start reinventing the way they work.
Which areas of the software and SaaS industry are most exposed to this disruption and why?
All software/SaaS industry sectors are exposed to AI disruption. We don’t believe any aspect of our enterprise software business will come out unscathed. Most dramatically, many mid-sized software companies face immediate existential threats, leading to significant consolidation. In 2026, we predict that M&A deal value will increase 30-40% year-on-year as AI disruption forces major consolidation in the mid-market enterprise software industry and the mid-market is squeezed by slower growth, investment in AI startups, and bets and investments by tech giants.
Are there any existing software/SaaS services that will continue to be essential and useful and will not be affected by AI disruption?
As for the mid-market, general-purpose productivity and workflow automation software will be hit the hardest. Incumbent companies with unique data moats, platform entrenchment, and vertical specialization in regulated industries, such as HIPAA-compliant patient data platforms, will fare better. Vendors that evolve their products to help customers transform static data sources into actionable contexts are most successful.
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