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Why software stocks are getting pummelled

economist.com

141–150 of 285 posts

Re: Why software stocks are getting pummelled

#141
post #26

What an odd article that is just designed to hype the software creation aspect, which doesn't really affect MAGAF. MSFT went down because of overexposure in AI and because it is clear that people do not want it. AI weariness is a thing, and if people go off the Internet or advertisers question whether humans or AI swarms are "watching" their ads it is over for the big players. Trying to salvage the situation by hypin…

What an odd account that is just created to try sway opinions on hot button topics.

Where have I seen this before? Oh right, the entire site, for months now. Nothing suspicious about that at all, I'm sure a swarm of other brand new accounts will reassure me 0.1 microseconds after being created. You guys sure do type fast!

Re: Why software stocks are getting pummelled

#142
post #126

Earlier quoted context omitted.

You are taking my comment way too literatlly. The point is not that people will be using specifically Excel, but that most business only pay for software because it is the tool that gives them the most power to automate their processes. They don't need high availablility, they don't need standards compliance, they don't extensive automated tests, they won't need cloud engineeers and SRE... all you need is some tool t…

I don't disagree with anything you say here - using a tool that lacks guardrails is fine for a lot of tasks, but if that's the only tool and used where those guardrails go from "nice to haves" to something more critical is where the problem is. I've been in ops for a long time and have encountered far too many "our IP addressing plan is just a spreadsheet with manual reconciliation". I truly wonder if Excel and all i…

> holding back industry from making something truly better and more reliable.

What "industry"?

If you are talking about the software industry, then I'd say you are creating a circular reasoning. If you are talking about all the other things that we actually need to do and which only incidentally have become too reliant on software to do it, then see back my original point: people don't need "better and more reliable" software to keep running their businesses.

Re: Why software stocks are getting pummelled

#143

Earlier quoted context omitted.

surprising considering you just listed two primary use cases (exploring codebases/data models + creating documentation)

I don't find this surprising. Code and data models encode the results of accumulated business decisions, but nothing about the decision making process or rationale. Most of the time, this information is stored only in people's heads, so any automated tool is necessary blind.

This captures succinctly the one of the key issues with (current) AI actually solving real problems outside of small "sandboxes" where it has all the information.

When an AI can email/message all the key people that have the institutional knowledge, ask them the right discovery questions (probably in a few rounds and working out which bits are human "hallucinations" that don't make sense). Collect that information and use it to create a solution. Then human jobs are in real trouble.

Until that AI is just a productivity boost for us.

Re: Why software stocks are getting pummelled

#144

> The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company.

Lol. ServiceNow, Oracle, Workday, etc are not small monthly fees. That's what the market is shitting on. (Oracle is different, given the corruption and OpenAI grift angle.) My buddy works for a company like these. He landed a $5M contract last year, which netted him almost $800k. There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack those margins. AI-based startups like Vanta ma…

> There's alot of fat to be cooked out of this stuff, and AI will help smaller entrants attack

truer words have never been spoken. I work in some of these platforms and lead teams of developers who write customizations. These customizations are not rocket surgery, basic CRUD with some logic requirements that can't be met ootb. It's very time consuming and therefore expensive to clients. The significant moat incumbents have is brand recognition and trust. On the other hand, a hot new "Agent First" consulting firm at 1/3 the price would be hard for a director to not at least experiment with.

Re: Why software stocks are getting pummelled

#145

Maybe just maybe, the markets are not as rational as these people think they are

Reminds me of that time when Nintendo's stock exploded after the launch of Pokemon go, only for traders to discover a few hours later that Niantic actually owned the game and correct the situation.

Re: Why software stocks are getting pummelled

#146

> The fear is that these [AI] tools are allowing companies to create much of the software they need themselves. AI-generated code still requires software engineers to build, test, debug, deploy, secure, monitor, be on-call, support, handle incidents, and so on. That's very expensive. It is much cheaper to pay a small monthly fee to a SaaS company.

> > The fear is that these [AI] tools are allowing companies to create much of the software they need themselves.

If that's their fear they don't know much how your typical big businesses functions.

You've dealt with a large, consumer bank? Many of them still run on IBM mainframes. The web front end is driven by pushing buttons and screen scraping 3270 terminal emulators. You would think a bank with all it's resources could easily build it's IT infrastructure and then manage all the technology transitions we've gone through over the past few decades. Clearly, they don't and can't. What they actually do is notice they have to adapt to the newfangled IT threat, hired hordes of contractors to do the work, then fire them when done. After it's done they go back to banking and forget all the lessons they've learnt about building and managing IT infrastructure.

If you want to see how banking and computers should be combined, look at the Fintech's, not banks. But for some reason I don't understand traditional banks still out compete Fintech's. Maybe it's getting your head around both banking and running an IT business it too much for one human mind?

That same pattern is repeated everywhere. Why was everyone so scared of Huawei? It wasn't because they built the gear. It's because the phone telco's have devolved into marketing and finance companies who purchase in the gear from companies like Huawei and rent it out. Amazingly they don't know how to run the gear they purchased, instead get the supplier to install it and maintain it. But that meant what some eyes viewed as an organ of the Chinese communist party was running the countries phones with full access to every SMS and voice call. (Interestingly, IBM pulled the same stunt with the banks back in the day: you didn't buy an mainframe, you leased / rented it from IBM, and they maintained it.)

It's the same story everywhere I look. These big firms stick to the knitting. If you want to see total, utter incompetence in IT go work whose core business doesn't revolve around IT for a while. These are the firms that still choose Microsoft, despite the fact they've seen Sony's Microsoft based IT infrastructure torn apart so badly by North Korea they didn't know who their employees were, how much they owed creditors or how much debtors owned them for a while. Why do they choose Microsoft? Look around - who else allows you to outsource the know how about connecting millions of computing devices in 1000's of offices to a redundant cloud infrastructure that allows them to share data while providing a centralised authentication / authorisation infrastructure. There is only one choice, apart from developing it themselves which is out of the question.

If those businesses did start using what passes for AI today to manage and develop their own IT infrastructure, the result would not be pretty. But for all the shit I'm throwing at them here, I'm confident they are smarter than that. They know their limitations, they haven't done it before, and they won't start doing it now.

Re: Why software stocks are getting pummelled

#147
So one thing that hasn't changed is that the marginal cost of software is still effectively zero. That's where most of the money was being made b/c if you were a monopoly or oligopoly that each additional unit sold was an absolute increase in revenue and you spread out your fixed costs.

What has changed most dramatically is the "fixed" cost of writing the software to begin with. Given that the costs were being spread out over so many units beforehand, it's not entirely clear to me how that changes a lot of the economics.

For the comments about the "SaaS vs build your own", we can use a home services metaphor. Sure, I can do a lot of what my plumber does. But they do it faster, know all of the issues that go wrong with the work and I can pay them a yearly fee to check my boiler to make sure it doesn't fail etc. The time saved by calling the plumber can then be spent with kids, more work or a combo of the two.

Re: Why software stocks are getting pummelled

#148

Earlier quoted context omitted.

In the case of Photoshop it is the software itself that is becoming useless. In a few years, using photoshop will be viewed the same as developing physical film, a process from a by-gone era that is still possible, but impractical.

This is an extremely bold claim and I think that it completely overlooks how Photoshop is used by professionals in practice. Professional users want extremely fine grained and precise control over their tools to achieve the specific results that they want. AI "image editing" is incapable of providing anything remotely similar.

Yes, "professional users" need this. The problem is that the group of professional users who need that will shrink really fast in the next few years.

Re: Why software stocks are getting pummelled

#149

Earlier quoted context omitted.

A lot of these companies are not small monthly fees. And if you’ve ever worked with them, you’ll know that many of the tools they sell are an exact match for almost nobody’s needs. So what happens is a corporation ends up spending a lot of money for a square tool that they have to hammer into a circle hole. They do it because the alternative is worse. AI coding does not allow you to build anything even mildly complex…

I have a prime example of this were my company was able to save $250/usr/mo for 3 users by having Claude build a custom tool for updating ancient (80's era) proprietary manufacturing files to modern ones. It's not just a converter, it's a gui with the tools needed to facilitate a quick manual conversion. There is only one program that offers this ability, but you need to pay for the entire software suite, and the pro…

> It's not just a converter, it's a gui with the tools needed to facilitate a quick manual conversion.

is this like a meta-joke?

> I have a prime example of this were my company was able to save $250/usr/mo for 3 users by having Claude build a custom tool for updating ancient (80's era) proprietary manufacturing files to modern ones.

The funny thing about examples like this is that they mostly show how dumb and inefficient the market is with many things. This has been possible for a long time with, you know, people, just a little more expensive than a Claude subscription, but would have paid for itself many times over through the years.

Re: Why software stocks are getting pummelled

#150
post #26

What an odd article that is just designed to hype the software creation aspect, which doesn't really affect MAGAF. MSFT went down because of overexposure in AI and because it is clear that people do not want it. AI weariness is a thing, and if people go off the Internet or advertisers question whether humans or AI swarms are "watching" their ads it is over for the big players. Trying to salvage the situation by hypin…

What an odd account that is just created to try sway opinions on hot button topics. Where have I seen this before? Oh right, the entire site, for months now. Nothing suspicious about that at all, I'm sure a swarm of other brand new accounts will reassure me 0.1 microseconds after being created. You guys sure do type fast!

yes, its continue to grow at as problem. Doesn't detract from the site as a whole, but there is more very very low value noise infiltrating in a way there hasnt been in the past - even in the relatively short time I've been here.
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