Back in February, the release of AI giant Anthropic's latest plug-in triggered a sharp selloff across technology stocks, fuelling fears that artificial intelligence could disrupt the traditional software industry. The episode quickly came to be known as the "SaaSpocalypse."Jefferies was among the first brokerages to coin the term, highlighting a dramatic shift in investor sentiment from "AI helps these companies" to "AI replaces these companies." Describing the intensity of the selloff, Jeffrey Favuzza from Jefferies' equity trading desk told Bloomberg that trading had turned into outright panic, with investors rushing to exit positions. "Trading is very much 'get me out' style selling," he said.Fast forward to June, Hong Kong-based CLSA said that while AI is forcing a shift in pricing models from seat-based to consumption-based structures, earnings estimates and management guidance across the sector remain resilient. The brokerage believes IT companies with strong partnerships with SaaS providers are likely to continue benefiting from demand for product engineering and implementation services.CLSA also drew a distinction between different categories of software. It argued that Systems of Record (SoR) are less vulnerable to AI disruption because they require deterministic outputs, whereas AI models are probabilistic and may generate different responses to the same query. Instead of replacing SoR platforms, AI is more likely to enhance them by acting as an additional interface layer. Systems of Engagement (SoE) and Systems of Work (SoW), however, face greater disruption risks since AI can more directly replicate their outputs. “Most SaaS players we analysed have either maintained or increased their revenue and margin guidance for the upcoming fiscal year and beaten consensus EPS expectations in the latest reported quarter. This implies no negative impact of AI visible yet,” the international brokerage said in a note. For instance, CLSA said Salesforce's first-quarter FY27 results highlighted accelerating AI adoption and reinforced the view that system integrators (SIs) stand to benefit from rising implementation and integration demand. During the quarter, Salesforce processed 2.8 trillion tokens, more than doubling sequentially, while agentic work units (AWUs) rose 111% QoQ to 3.8 billion. AgentForce customers in production increased 50%, with global SIs playing a key role in integrating multiple APIs into the model context protocol (MCP) layer that connects with frontier AI models.The brokerage noted that while Salesforce's overall workforce has expanded, most hiring has been concentrated in sales, with engineering headcount remaining largely unchanged over the past two years due to AI-driven productivity gains. The brokerage added that SaaS practices typically contribute 10-25% of revenues for most system integrators, making platform expertise and partnerships increasingly important. It believes SAP project delays seen at HCL Tech and Wipro are likely client-specific rather than reflective of broader platform weakness. Among midcap IT firms, CLSA highlighted Hexaware for its strong Guidewire capabilities, while Snowflake-related expertise was strongest at Birlasoft and Persistent. For ServiceNow, LTIMindtree was identified as having the strongest capabilities among large-cap IT companies.Arbind Maheswari of BofA Securities told ET Now that global investor flows are increasingly concentrated around one dominant theme: technology and artificial intelligence. "There are people who believe that Indian IT services' whole business model is put to question by the AI trade. The other side is that IT services companies will evolve and adapt and they have enough cash flow, they have resilience, and they have shown this in the past where there were threats that seemed existential for the IT services space.”“This time obviously it is much bigger and it could last longer but I am sure there is enough that these companies have in them both in terms of depth of management and business models that they can evolve to adapt to the new AI world," he said.Domestic brokerage Nuvama Institutional Equities has also pushed back against the bearish narrative, arguing that the sector is setting up for a powerful comeback rather than a structural decline following the AI-led selloff."We see no existential threat from Gen-AI," the brokerage said, adding that enterprises will continue to require system integrators to customize plug-and-play AI and software solutions for their highly complex legacy technology environments. Nuvama also noted that businesses will continue to depend on service providers to take responsibility when mission-critical systems fail. (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)