Software infra beats apps with no AI story

Result

If held over the last 3 months (Jul 31, 2026 – Oct 30, 2026): +4.6%. Over the same days: S&P 500 +3.7%.

What it holds

• Infra and cyber, 50% of the money, +18.2% over 3 months: CRWD (CrowdStrike). AI does not replace infra and security software soon.
• Apps with no AI story, 50% of the money, −8.3% over 3 months: against ZM (Zoom). Apps with no AI answer lag as AI builds simple apps.

The plan behind it

Jared Sleeper wrote on 12 Oct that the most relevant cut in software is apps against infra, with cyber counted as infra. App vendors have no answer for AI growth yet, and AI can now build simple apps. He is skeptical that infra is next. Of the names he lists, CrowdStrike (infra/cyber) and Zoom (no clear AI story) trade here. This holds CrowdStrike long and Zoom short, in equal parts.

Five quick SaaS takes: 1) $WCLD is now +72% in the last six months (!!) which is by far the biggest run in % terms since the pandemic. 2) The dispersion is violent- cyber/infra names like $TEAM, $OKTA, $GTLB, $SNOW, $CRWD, $DDOG et al are up 150%+, while companies without clear AI stories yet like $KVYO, $HUBS, $PCOR, $ZM, $TYL etc. are up <20% (some are down!). 3) I don't know how else to put this, but if you find yourself more bullish on SaaS overall than six months ago, something's not right with your process/investment mindset. Aside from a quarter or two of on-trend results, absolutely nothing has changed- if anything, the SaaS bear case has strengthened materially as AI model improvements have continued. You can now effectively one-shot simple SaaS apps. A big question for the future is whether infra is next- I'm skeptical but it isn't impossible to imagine a world in 2-3 years where someone can one-shot, say, Datadog and replicate it based on their current set-up. P(weird) in software has definitely, definitely gone up in the last six months. 4) So far, the most relevant cut is apps vs. infra (cyber counts as infra given how it is packaged/sold). Even Five9 (!!) is up 81% YTD now. In general, pure app vendors have done fine results-wise but have no answer for driving real AI acceleration yet. Their business models need to be re-architected for it (switch to consumption pricing, etc.) and tbh most productivity improvements have driven value for OAI/Ant vs. the app layer, even if the app layer hasn't lost relevance per se. The big test for the next year is whether some app vendors find their legs or not- I don't think the lack of progress so far is dispositive, but in a year that will be a different story. 5) As far as I can tell, while there is dim awareness of this, this mean reversion hasn't impacted sentiment/interest in software in Silicon Valley in the slightest. Interest in anything resembling traditional software remains remarkably low and skepticism remains high, in part because of the pace of model improvements. The valley is anchored to AI optimism and (to them) that naturally leads to software pessimism. The good news for the public/mature names is that there isn't a wave of well-funded competition coming- but it remains nontrivial for SaaS companies without clear AI stories to get funded, even if their public comps have done well in the last six months.

Picked by fxyz from @JaredSleeper’s post.

What would prove it wrong: App vendors find real AI growth, or AI starts to replace infra software.

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