There will be many winners in the AI space, but the disruptive effects on software-as-a-service stocks will not cause a repeat of the 2008 financial crisis, according to Farallon Capital CIO Nicolas Giauque.
The San Francisco-based fund manages $44 billion in assets and has suffered only one losing year since 1986, according to Fortune.
Software Disruptions In Tech But ‘Many Winners’ In AI
“Those disruptions that come from AI’s involvement in SaaS but also in asset-light businesses will have a meaningful impact on those portfolios,” Guaque told Tony Pasquariello, global head of hedge fund coverage at Goldman Sachs, on the investment bank’s “Exchanges: Great Investors” podcast, released on April 22.
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“There will be many winners, and there will be many losers,” he said when asked about the recent disruption in SaaS stocks by AI tools.
Software-as-a-Service stocks lost more than 20% of their value in the first two months of the year, and there are concerns about private credit lending to these companies. SaaS stocks have mounted a modest rebound in April, while Giaque said there will be many AI winners in the long run.
“I do not expect there to be a systematic risk associated with this,” Giaque said, referring to the potential for a 2008-style financial crisis.
Giaque started his career in the merger arbitrage space where he developed a strong awareness of downside risk. He said that investors can underestimate the potential risks in an investment.
“If you haven’t figured out how you can lose money, you haven’t thought long enough,” Giaque said.
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Some Analysts Feel AI’s Impact on SaaS Is Overdone
“The idea that SaaS is disappearing is based on a misunderstanding of what makes software valuable in practice,” Bubble co-founder and CEO Josh Haas told Forbes.
He said that many companies will suffer as AI tools can be built for an ever-growing list of tasks, but he says there are key themes that AI can’t replace.
If a product is “a simple database plus a form plus a dashboard,” customers will question the need for recurring fees, Haas said. The companies he sees surviving will be the ones providing a high level of customer service, regulatory support, and security.
Giaque told Goldman’s Pasquariello that he favors buying the SaaS companies with the best chance of survival, alongside the AI companies that are upending traditional sectors and technologies.
With AI expected to create both winners and losers across SaaS and broader tech markets, some investors focus less on picking individual stocks and more on overall portfolio positioning. In these environments, some choose to connect with a financial adviser to better understand how to balance exposure to growth themes with risk …
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