Software Companies Are Getting Eaten Alive by AI — And the Carnage Is Just Beginning
Building software used to require armies of developers, months of coding, and budgets only major players could afford. Now, anyone with a laptop and an AI assistant can build websites, apps, and tools that once took teams of engineers years to create. This shift is wiping out entire categories of companies that built their businesses by being the only game in town.
Monday blues: Monday.comMNDY perfectly illustrates how quickly AI can disrupt established software companies. The workflow platform admitted Google’sGOOG AI Overviews have been devastating its website traffic, cutting off the discovery funnel Software as a Service (SaaS) companies rely on to convert free trials into paid accounts. Executives argued the remaining leads were high quality, but that misses the point: if AI intercepts users before they ever reach your site, the funnel itself collapses. And that pressure is spreading across the traditional SaaS sector.
- Monday.com’s stock is down more than 33% over the past 12 months on slower growth and margin compression — despite reporting 24% revenue growth in Q2.
- Meanwhile, since the start of 2025, HubSpotHUBS and AtlassianTEAM are each down over 30%, while SalesforceCRM has dropped 26.2% despite being a supposed AI leader.
SaaS Meets Its AI Reckoning
While established software firms see their web traffic disappear before their eyes, AI coding startups are raising money at eye-popping valuations — a clear bet that these tools can replace entire categories of software. Instead of buying pre-built tools, users can create custom solutions in minutes with little to no coding skills. That flips the traditional SaaS model on its head — and the funding rush shows investors are betting these assistants will capture massive market share from incumbents:
- Cognition, the firm behind the AI coding agent, Devin, raised $500M at a $9.8B valuation, backed by Founders Fund and Khosla Ventures — more than doubling its worth.
- Similarly, Vercel, maker of the v0 coding platform, is weighing a new raise that could value it near $9B, as demand climbs for AI tools that make software building accessible to all.
Custom wins: Coding assistants have quickly evolved from simple landing-page generators into platforms that can spin up full sites with payments, security, and core features. AI-powered website builder Lovable is leading the step into SEO tools — right into the territory once owned by website builders. That shift is undercutting Wix’sWIX relevance, since many of its features are now being absorbed by assistants. ShopifySHOP has held up better, offering payments, logistics, and e-commerce infrastructure that assistants haven’t matched — yet. For now, that’s enough, but the trajectory is clear: shallow tools are disappearing, and even the deeper ones won’t stay safe forever.