Neither "AI Bubble Burst" Nor "Enterprise Software is Dead" Extremes Seem Likely

If you are an investor in either enterprise software; high-performance data centers or both, you face a truly-odd scenario, where, at the same time, we are warned that an “AI investment bubble” is underway at the same time that enterprise software (or software as a service generally) is at risk of extreme disruption from AI. 

One might argue software disruption or a high-performance computing “bubble” are conceivable, but not both together, as they tend to be mutually exclusive outcomes. 

In other words, the logical problem is that if AI really does not produce financial returns that justify the huge investments, then perhaps enterprise software actually is not badly disrupted.

On the other hand, if enterprise software really is disrupted, then the AI investments ought to have paid off, as they have proven consequential enough to destroy much of the value of enterprise software. 

And it always is possible that neither extreme scenario develops. In that case, perhaps high-performance computing facilities do produce a reasonable return, if perhaps not a “once in a lifetime” extraordinary return. 

And perhaps enterprise software adapts to AI, reshaping its business model successfully, though perhaps suffering a loss of profit margins in some instances. 

It’s the sort of scenario we often encounter. Some worry that Nvidia’s high margins or gross sales will be affected by competitors, ranging from AMD to in-house chip replacements from Alphabet or AWS, for example. 

And, often, there is some degree of displacement, but not ruin. And while we cannot know the timing or extent of disruption (so we must choose our “buy” prices), the extreme scenarios tend not to emerge. 

Netflix might not ultimately acquire Warner Brothers Discovery. Paramount might get the asset. Is it the “end” for Netflix? Not many would agree. Might Netflix have to find other ways to keep growing revenue? 

Yes. 

But apocalypse is not a likely outcome. 

Prudent investors will attempt to take advantage of market mispricing. And some degree of mispricing is likely. Volatility can be “your friend.” 

Scenario	The "Bear Case"	Why it invalidates the other Bear Case
AI Infrastructure Fails	Data centers sit empty; no ROI.	SaaS is Safe: If AI isn't useful enough to pay for compute, it isn't powerful enough to replace the complex workflows and "systems of record" that SaaS provides.
SaaS is Disrupted	AI agents replace apps and "per-seat" pricing.	Infra is Validated: To disrupt SaaS, AI must be doing the work. This requires massive, constant compute. The "Capex" wasn't a waste; it was the foundation of the new economy.
The "Middle Path"	AI becomes a feature, not a substitute.	Both Win/Lose: This is the boring reality where SaaS companies integrate AI and raise prices, and Infra gets a steady, if not "hyperscale," return.

We are never free from the risk of picking the “wrong” assets in a momentarily-depressed asset class, or making the wrong bets on whole categories of assets. 

But it seems to me unlikely the extreme “AI infra bubble” burst or “enterprise software is dead” theses will happen.

Some bad bets will be made, no doubt. That always happens. But do we really want to bet against the magnitude of impact?