CNBC’s Jim Cramer on Thursday told investors that enterprise software companies may not be as lucrative as they have been over the past few years as artificial intelligence technology gains traction.
“We may be at the beginning of the great unwind of most enterprise software and the great ascendancy, not of the people pictured with [Nvidia CEO] Jensen Huang, but of the ultimate clients who’ll use his wares to figure out how best to put their employees to work in a world where AI’s changing the entire business landscape,” he said, referencing the head of the ultra-profitable chipmaker.
Cramer highlighted the market’s reaction to Salesforce‘s revenue miss Wednesday night — its first one since 2006 — which sent shares plunging 20% by Thursday’s close. CEO Marc Benioff described a “measured” buying environment across the industry after Covid, when companies had bought up large amounts of enterprise software.
While Cramer said he’s not writing off Salesforce, he suggested there may be too many enterprise software companies in the business, saying perhaps customers have purchased more of its products than they can actually use. Companies could be reevaluating their investment in enterprise software as they figure out how AI can change business operations, according to Cramer.
He noted that some enterprise software is designed for jobs that AI could make superfluous. Cramer added that many of these products follow a pay-per-user model, and sales could slow if companies let go of employees whose roles can be performed by AI.
“For those who’re selling software that dealt with the traditional mode, and traditional model pre-artificial intelligence, AI kind of feels increasingly like a coin toss,” he said. “It could be a bonanza if they can fit right into the new paradigm, but it could be the beginning of obsolescence if they can’t.”
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Disclaimer The CNBC Investing Club Charitable Trust holds shares of Salesforce and Nvidia.
