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Is Software Eating The World Being Eaten By AI?
00:23:43
Alphabet earnings. Claude goes to the Superbowl. Why AI brand loyalty isn’t even remotely a thing yet. And is the whole Marc Andreessen theory of software eating the world in the process of being eaten by AI? Wall Street is worried about that very scenario.
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The world moves fast, your workday even faster. Pitching products, drafting reports, analyzing data Microsoft 365 Copilot is your AI assistant for work built into Word, Excel, PowerPoint and other Microsoft 365 apps you use, helping you quickly write, analyze, create and summarize so you can cut through clutter and clear a path to your best work. Learn more@Microsoft.com M365 copilot.
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Welcome to the Tech Brew Ride home for Thursday, February 5, 2026. I'm Brian McCullough. Today, Alphabet Earnings Claude goes to the super bowl why AI brand loyalty isn't even remotely a thing yet. And is the whole Marc Andreessen theory of software eating the world in the process of being eaten by AI? Wall street is certainly worried about that very scenario. Here's what you missed today in the world of tech foreign. Cap table management, who needs it? Well, you probably do, but that doesn't mean it should drain your time or derail your budget. Pulley knows there's a better way. That's why they help take the complexity and surprises out of equity management. Pulley's intuitive workflows, built in compliance tools and decision ready reporting are designed to work for you, not against you. Pulley helps you issue, track and manage equity, stay compliant with up to date for valuations, complete stock based compensation reporting and more. Learn more and get started at pulley.com brew that's pulley.com brew Alphabet reported earnings last evening and shock. They're still growing, still making money. Though the stock is down 5% today. I'm not sure if that's related to broader market issues or not. Anyway, what I found pertinent to our interests is Alphabet is increasing its 2026 CapEx forecast to between 175 and $185 billion. That is up from the $91.4 billion they spent in 2025. So they too are putting the pedal to the metal in terms of AI spend. Quoting the ft, Google said it plans to double its capital expenditure this year to as much as $185 billion, as strong growth in its advertising and cloud businesses added to the search giant's financial firepower for its huge bet on AI. Chief executive Sundar Pichai has argued that AI investments were supported by big jumps in earnings and cash flow as its advertising revenue continues to climb and AI demand lifted its cloud computing arm. Our capex spend this year is an eye toward the future, he said. The demand we are seeing across the board for our services and what we need to invest in Google DeepMind and in Cloud is exceptionally strong. Pijay said that despite the big investments in data centers and its own custom AI chips, known as TPUs, he still expects demand from its DeepMind research lab and from customers to outstrip the new computing power it can bring online. Investors have been sensitive to trends in AI spending, with fears spreading about a bubble developing in public and private markets as revenues lag far behind the cash being pumped into the technology. When Microsoft also disclosed a big jump in capex last week, now set to exceed $140 billion this year, its shares fell by more than 10%. By contrast, Meta rose even as it forecast annual capex of $135 billion because the social media giant was able to show that AI was improving advertising efficiency. End quote. By contrast, Meta rose even as IT forecast annual capex of $135 billion because the social media giant was able to show that AI was improving advertising efficacy. Google also said that its Gemini app has more than 175 million monthly active users, up from 650 million in November, and its first party models now process more than 10 billion tokens per minute via direct API use by customers. Also quoting Variety YouTube generated more than $60 billion in revenue for 2025, including both advertising and subscriptions, the first time parent company Alphabet has broken out total revenue for the platform. That makes YouTube much larger than subscription streaming leader Netflix, which reported $45.18 billion in revenue for full year 2025. Indeed, the top line number for YouTube was more than any other entertainment company except Disney, at $75.7 billion in revenue for calendar year 2025. YouTube Shorts the platform video format now averages 200 billion daily views, according to Google's Neil Mohan. End quote. OpenAI has launched Frontier, an AI agent management platform that provides shared context, onboarding and permission boundaries for a limited set of customers. Quoting the Verge Managing humans is hard. Managing AI agents is also hard. That's why OpenAI is launching a new platform called OpenAI Front Frontier, which it says will help businesses build, deploy and manage AI agents, even those not made by OpenAI itself. OpenAI's description of Frontier sounds something like HR for AI. Frontier gives agents the same skills people need to succeed at work shared context, onboarding, hands on learning with feedback and clear permissions and boundaries, OpenAI wrote in a blog post. The similarity makes sense. OpenAI said the product was inspired by looking at how enterprises already scale people. Frontier is available today, though only to an unspecified limited set of customers with broader availability coming over the next few months, OpenAI said. Intuit, state Farm, Thermo, Fisher and Uber are among the first companies to adopt OpenAI Frontier. With dozens of existing customers having piloted it as well, it's not clear how much Frontier will cost either. In a press release, the chief revenue officer, Denise Dresser, declined to disclose pricing at this point in time. Frontier is an agent interface, said Barrett Zoff, OpenAI's general manager for Business to business, who recently returned to OpenAI after a stint at Thinking Machines Lab. Right now, many companies simply run AI agents on top of whatever they're using, which often means fragmented tools, disconnected workflows and siloed data. Frontier sits on top of that to create a shared business context for agents, connecting them with everything needed to work and communicate effectively. These connections mean deployed agents can operate across different environments, though. OpenAI said. Frontier also lets users set boundaries, making it possible to use them confidently in sensitive and regulated environments. Frontier will also make it easy for human teams across organizations to hire AI coworkers for tasks like running code and data analysis. OpenAI said agents will also build memories and can be evaluated by human workers, which should make them more useful over time. The end goal for OpenAI sounds suspiciously similar to Sauron's motivation in the Lord of the Rings. One Platform to rule them all by the end of the year, most digital work in leading enterprises will be directed by people and executed by fleets of agents, said Fiji Simo, OpenAI's CEO of Applications. And what I dreamed of was having one platform to create and manage all of our agents. Interestingly, this means a recognition that we're not going to build everything ourselves, said Simo. Frontier will use open standards and can be populated with agents built by OpenAI, the enterprise customer, or another AI company. End Quote. Anthropic says Claude will remain ad free, its users quote won't see sponsored links adjacent to conversations, and responses won't be influenced by advertisers. Quoting the Verge, the announcement goes on to highlight exactly why including ads would be incompatible with what we want Claude to be. It suggests the profit incentive could interfere with providing the most helpful advice to a user, asking about health problems like sleeping issues, and that ads might prove a distraction for anyone using Claude to work. That said, Anthropic does make sure to leave the door open for a reversal. Should we need to revisit this approach, we'll be transparent about our reasons for doing so. An about face a few years down the line might look hypocritical in light of the new super bowl ad that comes Company is releasing to highlight its announcements. It's one of four commercials released so far on YouTube along the same theme with humanized AIs dropping adverts in the middle of their advice. The Wall Street Journal reports that a shorter 30 second version of this spot will air during the game on Sunday with a separate minute long commercial featuring ad enabled AI therapists during the pre game show. None of the ads call out ChatGPT by name, but their target is obvious, end quote. Obvious enough to Sam Altman at least that he tweeted, quote first the good part of the Anthropic ads. They are funny and I laughed. But I wonder why Anthropic would go for something so clearly dishonest. Our most important principle for ads says that we won't do exactly this. We would obviously never run ads in the way Anthropic depicts them. We are not stupid and we know our users would reject that. I guess it's on brand for Anthropic doublespeak to use a deceptive ad to critique theoretical deceptive ads that that aren't real. But a Super bowl ad is not where I would expect it, end quote. Did you know that Zipline, the autonomous drone delivery company, didn't start out by delivering packages. In fact, they actually started out with a robotic toy. We all remember the choices that shaped the course of our lives in business. World renowned venture capital firm Sequoia Capital calls them Crucible Moments. Their podcast brings you inside the pivotal decisions that defined some of today's most influential companies. Crucible Moments is entrepreneurial podcasting done right, not just talking endlessly. Actual key takeaways you can learn from. Hosted by Sequoia's Rule of Botha Season 3 deep dives into the stories behind companies like Zipline, Palo Alto Networks and supercell. Crucible Moments is available everywhere you get your podcasts and@CrucibleMoments.com go listen to Crucible Moments today.
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1-800-Contacts. I'm fascinated by the degree to which the changing preferences for AI brands is so fluid right now. I guess I shouldn't be since this is all so new. So no brands have solidified in the marketplace yet. It reminds me of the search engine wars of the 90s or the productivity app wars of the 80s. Let me give you an example. According to recon, the US market share of Copilot as paid users first choice for an AI chatbot fell from 18.8% in July 2025 to only 11.5% in January of this year, while Gemini's rose from 12.8% to 15.7%. Quoting the Journal, Confusing brand positioning and interoperability problems have frustrated users, Current and former employees who have worked on Microsoft's AI products said only a small proportion of subscribers to Microsoft's enterprise suite use Copilot, and the percentage of those who favor it over Google. Google's Gemini or other tools has decreased in recent months, according to data reviewed by the Journal. We have moved past the initial phase of discovery of AI, satya Nadella wrote in a December blog post, adding that the industry was entering a phase where we are beginning to distinguish between spectacle and substance. Chad A. Morganlander, senior portfolio manager at Microsoft Investor Washington Crossing Advisors, said that while Copilot is struggling now, our bet is they have this embedded client base and that they will get it wrong. Until they get it right, they have plenty of money. Marathon Microsoft has several versions of Copilot that are woven into apps and services, including its 365 productivity tools such as PowerPoint and the GitHub developer platform. There is also a consumer facing version available through its Edge browser and via an app. The different Copilots are divided into three main categories the enterprise tools Microsoft sells to companies and professionals, copilots for developers and IT personnel, and the general consumer chatbot led by Microsoft AI CEO Mustafa Suleiman. Last week, Microsoft reported that it had sold 15 million Microsoft 3365 copilot seats. Its Microsoft 365 business had a base of 450 million plus paid seats. Overall. The company late last year said it had more than 150 million monthly active Copilot users across its first party platforms. Google's Gemini has more than 650 million monthly users, while ChatGPT has about 900 million weekly active users. Data point number two according to Aptopia. ChatGPT's US market share fell from 69.1% to only 40%, 45.3% from January of last year to January of this year. Gemini rose in that same time period from 14.7% to 25.1%. Grok rose from 1.6% to 15.2%. This is from our friend Alex at Big Technology. Quote the data obtained by Big Technology from mobile insights firm Apptopia indicates the chatbot race has tightened meaningfully over the past year, with Google's surge showing up in the numbers. Overall, the Chatbot maker increased 152% since last January, according to Apptopia, with ChatGPT exhibiting healthy download growth as well. On desktop and mobile, a similar pattern appears, according to analytics firm Similar web visits to ChatGPT went from 3.8 billion to 5.7 billion between January of last year and January of this a 50% increase, while visits to Gemini went from 267.7 million to 2 billion, a 647% increase. ChatGPT is still far and away the leader in visits, but but it has company in the race now. ChatGPT showed really strong growth for most of 2025, said David Carr, insights news and research editor at SimilarWeb. That said, we did see a ChatGPT traffic dip in November December, which coincided with a growth spurt for Gemini. Preliminary data for January show ChatGPT traffic recovering but not back to its peak of 6 billion plus visits in October. And Gemini continues to grow strongly, up another 17% month over month, based on a preliminary estimate for January. After experiencing torrid growth through most of 2025, the chatbot market itself leveled off somewhat in recent months. The market is flattening a bit, said Apptopia director of Public Relations Adam Blacker. We likely have not hit peak gen AI apps, but this is an early inflection point where there may be a gap between early adopters and everyone else. There's also evidence that the chatbot race is not zero sum. 20% of chatbot users were using at least two apps by the end of 2025, up from 5% at the end of 20. And finally, pure user numbers don't tell the full story, since users spend different amounts of time with each chatbot on average. Even though Anthropics Claude doesn't have close to as many users as ChatGPT or Gemini, the time people spend with it has surged from about 10 minutes daily in June 2025 to more than 30 minutes daily today. End quote. Finally today, software and data stocks have been plunging all week over fears that new AI developments will supplant software in terms of importance or making money, et cetera. Adobe closed down 7.3%, Salesforce is down. Thomson Reuters is down as much as 15%, quoting the journal On Tuesday morning, investors homed in on Anthropic's announcement that it was adding new legal tools to its cowork assistant, meaning that it would help automate a number of legal drafting and research tasks. Shares of Thomson Reuters, LegalZoom and the London Stock Exchange, which all provide some form of legal tools or research databases, all fell more than 12% by afternoon trading. The downturn had swept through the broader software market. PayPal, Expedia, EPAM Systems, Equifax and Intuit were among the hardest hit, all dropping more than 10%. A pair of S and P indexes that track software, financial data and exchange stocks lost a combined total of around 300 billion dol dollars in market value. If things are advancing as rapidly as we hear from OpenAI and Anthropic, it's going to be a problem. Investors are starting to go after any of the companies that could be disrupted, which is all kinds of software application names, said Art Hogan, chief market strategist at B. Riley Wealth Management. Even before Tuesday's drop, software and service was S and P Dow Jones Indices worst performing subsector this year. Private fund firms, which which invested heavily in software equity and debt in recent years, also suffered in the sell off. Private equity managers snapped up software companies over the past decade, often borrowing money from private debt funds to pay for the buyouts. The flurry of deals left software as a significant slice of their investment portfolios. Software was supposed to eat the world, as tech investor Marc Andreessen once predicted, and until recently, the industry's growth made for profitable investments. Now, with the industry under pressure from AI, some of those software holdings have drawn scrutiny. View this as a private credit or liquidity issue, john Gray, Blackstone's president and chief operating officer, said at the Wall Street Journal Invest Live event on Tuesday. It's the change happening in the economy. You could be an incumbent software company, that's the system of record, and maybe you face risk from AI disruptors. Software now accounts for about 20% of investments in business development companies, or BDCs, a booming type of private credit fund. That compares to around 10% in 2016, according to research by Barclays. But in a different piece, a different Journal writer took the opposite position. The belief that major corporations will replace highly complex software platforms with vibe coded apps is a stretch. Such platforms run mission critical tasks like payroll and IT management and require deep subject matter expertise that goes well beyond the actual coding of the software itself. Even the key enablers of today's AI industry seem to agree. There's this notion that the software industry is in decline and will be replaced by AI, Nvidia chief executive Jensen Huang said on stage at at Cisco Live on Tuesday. It's the most illogical thing in the world, and time will prove itself. The sell off could open the door for private equity buyers who like to snap up software companies. Then again, many of these firms were themselves caught up in Tuesday's sell off due to their existing software exposure. They might not be eager to increase that now. Valuations are certainly compressed. The average multiple of companies on the IGV index has collapsed from 39 times forward earnings to about 21 times now, according to data from FactSet. But those figuring are mostly based on analyst estimates that exclude stock based compensation, which can be deceptive in an industry that deploys it so much AI won't eliminate the need for specialized software platforms, but survival alone isn't enough to claw back recent losses. Oh my God. It's not just that Arsenal won the game the other day, but it was also that they won the game with a goal in the very last minute. My son was absolutely 100% focused on the pitch, on the game for the entire time. His eyes never left the pitch for two hours. And then the delirious celebrations at the end where complete strangers were hugging him and everyone around us and everyone around us was singing North London Forever. And and he was holding up his Arsenal scarf, singing along with everyone else holding up their Arsenal scarves. And then the train cars filled with people singing about going to Wembley on the way home. Dear listener, it could not have gone better for his first ever Arsenal match. Thank you Arsenal. Thank you, Kai Havertz. Talk to you tomorrow.