REUTERS/Eva Marie Uzcategui
In 2011, venture capitalist Marc Andreessen wrote, “Software is eating the world.”
He predicted software would take over large swaths of the economy, and that’s exactly what happened. Books became software, and Amazon beat Barnes & Noble. Movies became software, and Netflix won. Music became software, and Spotify rules over labels.
Now, we’ve entered a new era in which some software companies could be eaten by AI. This technology makes it easier to use and create new software, challenging established SaaS providers and upending business models.
New AI versions of software are popping up in a multitude of sectors, such as legal services, graphic design, marketing, HR, and healthcare. What used to be a discrete software product may now be just a series of requests in plain English typed into a chatbot or AI model. AI coding tools are even making it easier for people to create their own software, rather than buy it.
‘Zero terminal value’
This has profound implications for the software industry and the millions of employees who use and rely on this widespread technology. Wall Street has taken note, with shares of some established software vendors falling dramatically in recent months.
These AI software jitters reached such intensity that RBC analysts had to publish a big research note on Monday telling investors to calm down. They stressed that core systems of record, such as enterprise resource planning software, are likely not at risk. Still, their findings were not that reassuring.
“Incumbents have to be more careful about relying on incumbency as a default advantage and not take potential AI disruption lightly, especially with greater feature commoditization, moat erosion, and margin pressure on the horizon,” the RBC analysts wrote.
A day later, these same RBC analysts warned that a “zero terminal value” narrative has crept into HubSpot‘s stock, with some investors questioning whether generative AI could displace elements of the software company’s inbound marketing model. HubSpot stock is down about 35% this year. Similar concerns have plagued other SaaS companies, such as Salesforce, which has shed roughly 25% in 2025.
Adobe and graphic designers
Another software provider under AI pressure is Adobe. This company was initially thought to be an AI winner, but its stock is down about 20% this year. I think it’s the perfect example of how generative AI is beginning to undermine software business models and disrupt related jobs.
Inside Adobe, some employees have worried about the potential for AI to reduce the need for graphic designers, who are key customers for the company’s image editing and creation software such as Photoshop and Illustrator.
Business Insider’s Eugene Kim wrote exclusively about this in the summer of 2023. Kim quoted a senior designer at Adobe who warned internally that a business he knew planned to reduce the size of its graphic design team because of new AI text-to-image features. “Is this what we want?” he asked colleagues.
Adobe has said it has a history of introducing new technology that leads to more productivity and jobs. Still, this issue has come up on earnings calls, with analysts asking whether easier and cheaper AI image tools could reduce demand for Adobe’s software.
As this AI technology becomes more potent, and easier to use for more people, it might reduce demand for the skills of professional graphic designers. AI systems could eliminate 300 million jobs worldwide, including a quarter of those in the arts and design industries, Goldman Sachs has estimated.
Google’s banana
Enter Google. This week, the internet giant released a new AI photo-editing tool and baked it into its Gemini chatbot service. The early version of this tool was called Nano Banana, and I wished they’d kept the name. Oh well.
Users of the free version of Gemini now get almost 100 images a day to either edit or create, using simple natural language requests. There’s also a paid version of the Gemini chatbot that costs $20 a month. This includes up to 1,000 images per day, and offers a host of other features that compete pretty well with ChatGPT.
Compare that to Adobe’s Photoshop. This is a little harder to use and usually requires some training to become proficient. It costs about $23 a month for individuals and offers very few of the extra AI bells and whistles that Gemini has.
I tried this new Gemini image-editing tool with Business Insider’s Hugh Langley. It was fast, easy to use, and free. Why would you pay $23 a month for Photoshop when Google offers similar capabilities, either for free or for less money?
Adobe says it’s integrating AI across its software suite and letting creators seamlessly move work between its apps. Yet on the same day Gemini was upgraded, Adobe adopted Google’s new AI image model to power some of its own tools — hardly a show of in-house strength.
No surprise: Adobe stock fell on Tuesday when Google’s launch went live. The shares have lost at least 30% in the past five years, leaving the company worth about $150 billion. Google’s market capitalization is $2.5 trillion.
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