Technology Sector Ripples: Has GenAI Eaten SaaS?
Technology Sector Ripples: Has GenAI Eaten SaaS?
Our latest Technology report explores how GenAI is reshaping the technology landscape. The analysis is structured around four core themes: pressure on enterprise SaaS models, unprecedented hyperscaler investment, emerging infrastructure bottlenecks – particularly around power and data centres and the growing strategic importance of cybersecurity.
AI innovation puts SAAS model firmly in the spotlight in Q1 2026
During Q1 2026, we have seen increased volatility across the technology sector. The Enterprise Software segment has seen a significant de-rating in multiple ranges as public markets bought into the short thesis that AI could irrevocably disrupt its business model forcing valuations down c.35% with average forward-looking Enterprise Value to Annual Recurring Revenues (EV/ARR) multiples dropping to c. 4x from c. 6x in a $2tn software market cap wipeout. The ramifications of new AI tools disrupting existing enterprise software as a service (SAAS) tools are without question a risk however we ask: 1) Is this a rational sell off? 2) What does it mean for revenue models? And 3) how can the incumbents respond? On 1); We see clear value angles and mispricing across from this sell-off event and as companies begin to reassure the market on outlook and reassert their sectoral leadership. On 2); We believe that revenue models will be disrupted particularly with enterprise SAAS revenues coming under pressure, on a per seat pricing basis with new metrics becoming more important such as gross retention rates. On 3); Incumbents deemed at risk of AI disruption may be able to evolve, pivot and grow faster through scaling their own AI revenue and business models. This depends on their industry segment; customer stickiness; product quality and data control but also via proactive strategic M&A.
We are in an industry-defining capex period for hyperscalers
We are amid the greatest capex lifecycle for hyperscalers in their history. In 2026 alone, hyperscalers have signalled an intention to deploy north of $650bn on AI Capex. In context, the scale of the spend is roughly twice that of last year with a cumulative forecast of over $5tn by 2030. Bringing that supply on-line is the risk.
Irish data centre developments point to continued gridlock
One of the key requirements for continued investment in data centres is high quality infrastructure development including a modern grid network capable of facilitating significant capacity. This is an area currently at threat in an Irish context with Bytedance turning down a second data centre build in Dublin favouring the Nordics citing capacity advantage. Hyperscalers are targeting national partnerships as countries seek to build a compute edge. Recent partnerships by Microsoft in Japan ($10bn) and Thailand ($1bn) underline this.
Cyber opportunities are extremely compelling
The prolific roll out of Generative AI (GenAI) is expanding the threat landscape. Areas such as agentic AI are driving new risks including data leakage/theft, loss or misuse activating confidential data in the public domain. In addition, AI tools in the hands of bad actors are creating a litany of novel risks that require new defence solutions. Furthermore, cloud security solutions are in high demand as organisations move to more complex multi-cloud environments to protect data.