Fifteen years later, in February 2026, Andreessen’s prophecy has been fulfilled in a manner that even the biggest bulls failed to predict. Software did indeed eat retail (Amazon), video (Netflix), music (Spotify), and telecommunications (Skype) just as Andreessen predicted, but the market got a $1 trillion shock in February because something was eating software itself. That something, of course, was artificial intelligence.
Morgan Stanley’s software analysts, led by Keith Weiss, offered a “gut check” this week in a major research note, arguing that “AI IS software” but also that software is growing so all-consuming that it is indeed starting to eat work itself. Andreessen’s a16z has a core strategy of investing across enterprise software, including cloud, security and software-as-a-service (SaaS), but the $1 trillion-plus selloff dubbed the “SaaSpocalypse” cuts to the very heart of that model. Andreessen looks like he was more right than he knew about software eating the world.
For a decade and a half, he was right. The “creative destruction” he invoked—citing economist Joseph Schumpeter—decimated legacy incumbents and minted trillions in value for software insurgents. However, the AI revolution of 2022 onward and the SaaSpocalypse of 2026 suggest that the cycle of creative destruction has arrived at the doorstep of the software industry itself. Morgan Stanley’s Weiss wrote of a “Trinity of Software Fears” currently driving down stock multiples by 33% that cut to a fundamental questioning of the software business model.
Previously, software required a human operator to input and manipulate this data. Now, Wall Street fears that software can do it all by itself. “Generative AI represents a continuing expansion of what types of work and business processes software can now effectively automate,” Weiss wrote, revisiting his team’s initial estimate that enterprise software’s total addressable market could grow by $400 billion by 2028. Three risks put that in question, principal among them that “as GenAI automates a broader swathe of work, the increasing productivity gains will result in a reduction in the number of employees necessary to execute those tasks.”
If software allows a company to cut its staff by half, it also cuts the number of software subscriptions it needs by half. After software ate the world, then, it appeared to start eating the revenue of its creators by eating the jobs of its users.
Andreessen predicted in 2011 that “software programming tools… make it easy to launch new global software-powered start-ups,” viewing this as a boon for entrepreneurs. Today, however, investors are beginning to view this democratized ease of creation as a threat to established software giants.
One of the primary fears cited by Morgan Stanley is the rise of “do-it-yourself” (DIY) software. This is colloquially known as “vibe coding,” where a user will ask the AI to code things in line with a certain vibe that they are going for. As AI code generation tools drastically lower the cost and skill required to write code, there is a growing fear that “companies will choose to develop more software themselves” rather than paying for expensive third-party vendors.
Furthermore, there is the looming threat of “model providers”—the creators of frontier AI models—rendering traditional applications obsolete. The fear is that an AI agent could act as an “intelligent user interface,” pulling together data and tools to automate workflows on the fly. In this scenario, the distinct “app” disappears, replaced by a single, omniscient model that serves as the operating system for the entire enterprise.
Like other analysts (and several rattled SaaS executives), Morgan Stanley argued that the market’s reaction is overblown, echoing Andreessen’s 2011 sentiment that investors were ignoring “intrinsic value” right in front of them. The bank suggested that the “bear case arguments around GenAI appear to give too little credence to the ability of incumbent software vendors to participate in this innovation cycle.”
Zooming out, Morgan Stanley said it sees a “path of innovation that actually looks relatively familiar”: a combination of improving productivity, better use of tools to automate functions and software value “predicated on labor displacement.” The difference now is the rapid pace of innovation compared to prior cycles and better tools on the market. It looking closely at Amazon Web Services and the shift in the early 2010s toward cloud computing. Even with the 33% pullback for software’s equity value/sales multiple since October, the group is trading about 15% above the beginning of the cloud era.
In his 2011 essay, Andreessen concluded with optimism, calling the software revolution a “profoundly positive story for the American economy.” He acknowledged challenges, specifically that “many workers in existing industries will be stranded on the wrong side of software-based disruption.”
