Morgan Stanley's top tech banker: It's 'wartime, not peacetime' for software

The recent Morgan Stanley Tech, Media, and Telecom conference showcased a formidable lineup of industry leaders, including notable figures such as Dario Amodei, Sam Altman, Jensen Huang, and Satya Nadella. With enterprise software executives eager to reassure investors amidst the ongoing AI evolution, the atmosphere was charged with urgency. In a conversation with David Chen, the head of global technology investment banking at Morgan Stanley, he highlighted a significant shift in investor inquiries compared to previous years. While discussions in 2025 revolved around utilizing AI to streamline expenses, this year, investors are more focused on whether companies stand to benefit from AI advancements or if they face existential threats. Chen noted that enterprise software firms have faced a staggering loss of market capitalization, with a trillion dollars disappearing in just a week. He differentiated between companies with deterministic software—those that handle critical tasks like payroll and invoicing—and those simply organizing public data. The former, he argued, retains a competitive edge, while the latter may find themselves in precarious positions. "AI doesn't kill software; it reshuffles it," Chen remarked, emphasizing that for companies lagging behind, the current landscape feels more like 'wartime' than 'peacetime.' He also pointed out a notable trend in leadership preferences, with boards increasingly favoring product-oriented CEOs capable of navigating the complexities of AI integration over traditional sales and marketing leaders. CNBC producer Jasmine Wu aptly summarized the transformation with the concept of moving from SaaS (Software as a Service) to SaaaS (Software for Agents as a Service). This shift reflects a changing customer base, as companies like Box are now focusing on software solutions for agents, which could lead to a tenfold increase in business potential. Looking ahead, Chen suggested that infrastructure spending on AI might stabilize around current levels, indicating a possible peak in the AI capital expenditure cycle among hyperscalers. He anticipates a reorganization of the enterprise software landscape, with cybersecurity emerging as a strong sector benefiting from AI, unlike many other areas. Moreover, Chen highlighted a surge of next-generation companies in semiconductors and systems dedicated to addressing the challenges in connectivity, computing, and energy that impact AI development. The overarching message from the conference was clear: AI has transitioned from a speculative notion to a present reality, and companies must demonstrate their commitment to embracing this change.