AI Application: Why Software Is Poised for a Huge Win
Examining hardware vs software // Due Diligence + Price Targets on Salesforce (CRM) and UiPath (PATH)
Software vs Hardware: The CAPEX Risk
The AI trade so far has paid the companies selling infrastructure. But hardware revenue depends on the rate of change of customer spending, and that rate is forecast to roll over: combined hyperscaler capex has roughly tripled from $256 billion in 2024 toward ~$785 billion in 2026, with Moody’s projecting nearly $1 trillion for 2027 implying growth decelerates from ~70% to roughly 27%.
Analysts have flagged the timing of this slowdown as a direct risk to infrastructure valuations, and the strain is showing: capex now approaches or exceeds operating cash flow at some operators (vs. a ~40% ten-year average), funding has shifted toward debt, and Moody’s has warned of creditworthiness reassessments if AI profits lag. Power constraints and shareholder ROI demands make the deceleration a question of when, not if.
Software inverts the exposure. Subscription revenue rides on the cumulative stock of deployed compute and workflows which keeps growing even after spending decelerates.
Deployed GPUs become cheap, creating even more inference capacity: the raw input cost of AI software. Falling compute costs (Alphabet cut Gemini serving costs 78% in 2025) squeeze hardware pricing power while expanding software gross margins.
By seeing how software multiples have lagged the infrastructure trade badly, AI monetization is arguably not yet fully priced in at the multiples we see today.
This is the exact reason whenever hardware stocks like AMD, AVGO, e.t.c fall software stocks always seem to inverse and go up.
Big money is trying to squeeze every last drop of profit out of hardware before the inevitable shift into software companies, making software companies a very attractive investment to those with larger time horizons, which is the opposite of big money trading firms who need results every quarter to impress investors/shareholders leading to the cheap valuations we see across the software space.
Software Names Poised to Win + Price Targets
Now there are many names in this space that are truly great companies with very healthy balance/income/cashflow statements trading at attractive valuations.
The names everyone knows like Microsoft, Meta, ServiceNow all have great valuations and would realistically all succeed when CAPEX dwindles away. But we at Aria Research are really focused on 3 big names here. Microsoft (which we have written about before and will therefore be omitted here - see former article), Salesforce (CRM) and a more speculative but interesting prospect in the space UiPath (PATH).
Here I will give our analysis on the direct head to head of two of our 3 favorites in the space with our price targets and reasoning behind them…
Salesforce ( CRM 0.00%↑ ) vs UiPath ( PATH 0.00%↑ )
Both names sit at the application layer, but they express the thesis differently: Salesforce is proven agentic monetization at scale trading at a depressed multiple.
UiPath is a cheap, newly profitable platform with unpriced optionality on agent orchestration.
