Software sentiment has shifted significantly as investors reassess the impact of AI across the sector. In this episode, Matt Hedberg and Rishi Jaluria discuss opportunities emerging across cybersecurity, data and infrastructure, the evolution of software business models, and where value may accrue across the software stack. They also explore cyber resilience and the economics of buy-versus-build decisions.

Key Points

• Software sentiment has improved as investors increasingly view AI as an opportunity to expand software capabilities rather than displace software altogether.
• Companies with strong track records of innovation may be best positioned to benefit as AI reshapes competitive dynamics across software.
• Rising AI-related security incidents are reinforcing the need for cyber resilience and security modernization.
• Software moats remain intact, while outcome-based pricing is emerging as an important area of business model evolution.
• DIY software strategies do not always reduce costs once maintenance, security and opportunity costs are taken into account.

How has software sentiment evolved this year? [00:55]

Matt Hedberg discusses the recovery in software sentiment, changing investor perceptions of AI, and the debate around the future of traditional SaaS applications.

What determines AI winners and losers? [04:58]

Rishi Jaluria explores why innovation remains the most important moat, the role of M&A as outsourced R&D, and how software business models may evolve.

What are the cybersecurity implications of recent AI incidents? [07:25]

The discussion examines rising AI-driven cyber threats, increasing demand for security modernization, and the implications for cybersecurity vendors.

What stood out from the software and AI bus tour? [09:55]

Insights from meetings with software companies, investors and private companies, including software moats, incumbent advantages, outcome-based pricing and the limits of vibe coding.

What does the DIY framework suggest about buy versus build? [12:36]

Matt Hedberg and Rishi Jaluria discuss the hidden costs of internally developed software and the trade-offs organizations face when evaluating DIY approaches.

Listen and subscribe to Strategic Alternatives on Apple, Spotify or wherever you get your podcasts. To learn more about software and AI trends and RBC Imagine research, contact your RBC Capital Markets representative or visit rbccm.com/strategicalternatives.