Software Shadows & Smart Money

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The market had a fit last week. A twitch, really, triggered by Anthropic’s Cowork. Another shiny object promising to do everything but make a decent cup of coffee. It’s AI, see? Claims it can read files, surf the web, the usual song and dance. Digital assistant, they call it. Sounds like a headache waiting to happen, but the herd stampeded anyway. Panic is a reliable indicator, if you know where to look.

The whispers started a while back. Microsoft’s Nadella, a man who knows a thing or two about shifting sands, declared SaaS “dead” not long ago. IDC chimed in, predicting a price war. The usual doomsayers. Cowork is just a preview, a glimpse of a future where software talks to itself, bypassing the messy business of human interaction. It’s efficient, maybe. But efficiency doesn’t always pay the bills.

AI won’t kill all software, not yet. But the industry is about to get a shakeup. The market’s in a mood, flailing like a landed fish. That’s where opportunity hides. I’ve been watching two stocks in particular. Paycom and UiPath. Not because they’re immune, but because they might just know how to navigate the coming storm.

Paycom: Betting on Outcomes

Paycom disrupted itself back in 2021 with Beti. Smart move. Let the employees handle their own payroll. It streamlined things, cut errors. Slightly cannibalized their other revenue streams, sure. But sometimes you have to break a few eggs to make an omelet. Beti delivered value, real value, to their clients. That’s a language I understand.

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AI isn’t exactly a threat to Paycom’s core business. They already sell results, not just software. And they’ve been quietly integrating AI, launching IWant in ’25. Voice and text queries, pulling data from a single source. Their CEO called it the biggest release since ’98. Bold talk, but I’ve seen enough to know they’re not just blowing smoke.

The stock’s taken a beating, down over 70% from its peak. Revenue growth is solid, but not spectacular. But they’re still incredibly profitable, a 22% net income margin. That’s a comforting number. The real risk isn’t the technology itself, it’s what happens if AI throws a wrench into the job market. Layoffs, business failures… that would hurt everyone.

At 16 times earnings, the valuation looks reasonable, considering their growth potential. They’re still a small player, revenue just over $2 billion. But that early move with Beti? That could give them an edge as the competition struggles to adapt.

UiPath: The Automation Edge

Anthropic’s Cowork is a warning shot for any company selling automation. UiPath isn’t immune. But they’ve found a strategy that, so far, is working. Combining robotic process automation with AI. Avoiding the pitfalls of each. It’s a delicate dance, but they seem to have the steps down.

Large language models are impressive, but ultimately, they’re just statistical tricksters. They can do a lot, but they still make mistakes. Grounding them in real-world data helps, but they’re still prone to making things up. A little like some analysts I know.

RPA, on the other hand, is rules-based. Predictable. Given the same input, it always does the same thing. But it can be brittle. Change the website, the application… the whole thing breaks. It’s a bit like a house of cards.

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Combining the two? That’s where the magic happens. Deterministic automation with the nimbleness of AI. Their CEO put it nicely: “Trusted enterprise-grade automation that delivers tangible ROI.” That’s music to my ears. Revenue grew 16% last quarter, and their net retention rate is 107%. Customers are expanding usage. That’s a healthy sign.

At 21 times adjusted earnings, the stock looks reasonably priced. They’ll face competition from AI-only solutions, sure. But their platform is more robust, more predictable. As the market punishes software stocks, UiPath is one to keep on your watch list. It’s a long game, and I’m looking for players who understand that.

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2026-01-20 16:43