CONTRIBUTORS
Stephen Dover, CFA
Chief Market Strategist
Head of Franklin Templeton Institute
Originally published in Stephen Dover’s LinkedIn Newsletter, Global Market Perspectives. Follow Stephen Dover on LinkedIn where he posts his thoughts and comments as well as his Global Market Perspectives newsletter.
Artificial intelligence (AI) is no longer a future theme; it is rapidly rewriting the enterprise software industry. In a new paper, Jonathan Curtis and Matt Cioppa, Co-Portfolio Managers with Franklin Equity, move beyond the hype to show where AI is creating value, which business models are under pressure, and what investors should watch next.
Below are my five key takeaways from their new piece.
- AI is not shrinking the software economy, it is reshaping how economic value is distributed. As intelligence becomes embedded across workflows, value is shifting away from headcount‑driven models toward systems that sit closer to machine activity.
- Software’s most important divide is no longer growth versus value, but seats versus usage. Business models tied to human employment face natural ceilings, while AI‑driven systems can scale far beyond the limits of the workforce.
- Falling software creation costs do not eliminate scarcity, they redefine it. As building software becomes easier, durable advantage moves to platforms that orchestrate, govern, and secure increasingly complex digital environments.
- Pricing power increasingly reflects strategic position, not product breadth. In an AI‑enabled economy, the most resilient revenues accrue to software that shapes outcomes and controls workflows, not just tools that enable tasks.
- For investors, software can no longer be treated as a single narrative. Discernment—understanding where AI expands economic leverage and where it erodes it—is becoming central to capital allocation decisions.
For a deeper exploration of how AI is repricing the enterprise software landscape—and what it means for investors—I encourage you to read the full paper by Jonathan Curtis and Matt Cioppa, Software in the “Age of Intelligence”.
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The portfolio’s investment strategies incorporate the identification of thematic investment opportunities, and its performance may be negatively impacted if the investment manager does not correctly identify such opportunities or if the theme develops in an unexpected manner. By focusing its investments in technology and information technology-related industries, the portfolio carries much greater risks of adverse developments and price movements in such industries than a portfolio that invests in a wider variety of industries.
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