Lyon Securities: The “death of software” fears caused by AI are overstated; the SaaS moat is still strong

The Zhitong Finance App learned that Lyon Securities (CLSA) pointed out in an in-depth special report that although the rise of artificial intelligence models has raised market concerns about the disruption of the software industry, software as a service (SaaS) is far from extinct. However, before investor confidence returns, the industry still needs to undergo profound changes.

The Hong Kong-based capital markets and investment group launched research coverage on Monday for a number of SaaS giants, including Microsoft (MSFT.US), Adobe (ADBE.US), Oracle (ORCL.US), CRM.US (CRM.US), ServiceNow (NOW.US), and Workday (WDAY.US).

Lyon Securities analysts Bhavtosh Vajpayee (Bhavtosh Vajpayee) and Hangyul Son (Hangyul Son) said, “The share of software in IT spending has increased 2.5 times in 20 years, and now we are facing a liquidation moment brought about by the rise of AI. This round of reality testing is cruel but necessary.”

“We are surrounded by commercial details, compliance requirements, and information filters managed by software,” Vajpayee said. The idea that AI 'vibe-coding' (vibe-coding) can eliminate all of this sounds unrealistic.

We found moats everywhere — ServiceNow's workflow catalog, Saftex's sales connections, Oracle's accurate database, Microsoft's omnipresence, Workday's human resources expertise, and even Adobe's font library.”

Lyon Securities gave Microsoft and Adobe an “outperforming market” rating, with target prices of $535 and $300, respectively; gave Oracle and SafeTime “hold” ratings, with target prices of $145 and $165, respectively; and gave ServiceNow and Workday “outperform the market” ratings, with target prices of $72 and $92, respectively.

Vajpayee added, “Out of the six companies we cover, we recommend Microsoft as 'outperforming the market' because of its ubiquitous nature, even though its Copilot is slightly clumsy and even has Clippy's shadow. Adobe also received our 'outperforming market' rating — its stock price fully reflected market concerns, but its moat was overlooked by the market when indicators performed better than expected.

Safez's growth must reach an inflection point before valuation rebounds, and Oracle's ambitious AI expansion is more like an adventure, and we'd rather wait and see. Both of these give a 'hold' rating. ServiceNow is the darling of the market, supported by resilience indicators, but the valuation is still high; Workday's moat is weaker than most of its peers.”