Bernstein: US SMid Cap & Global Software: Is the AI-Driven Hiring Boom a Tailwind for Seat-Based Software?
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Bernstein challenges the narrative that AI inevitably destroys white-collar jobs, arguing an AI-driven hiring boom is a tailwind for seat-based application software. Historical precedent from the PC and internet eras shows productivity leaps led firms to hire more knowledge workers, not fewer, because valuations benefit more from accelerating growth than from margin expansion. Ramp customer data show heavy AI adopters increased employment more over the two years after adoption than resisters, while non-adopters and light adopters stagnated; outside sales, most functions grew slower than total employment, yet demand stayed positive for admin, customer service, bachelor-only and entry-level roles. By industry, AI adoption runs about 54% in Information, 44% in Finance/Insurance and 36% in Professional/Scientific/Technical Services, versus just 11-22% across most other sectors.
The margin route is dismissed: S&P 500 margins rose only about 150bps over the past 30 years on a like-for-like basis, and excess margins should erode under competition. Roughly two-thirds of developers work in industries more likely to invest in growth, versus about 25% in shrink-prone ones; banks, autos, aerospace & defense and leaders like Walmart, McDonald's, Marriott and Delta tilt toward growth. Evidence of agent penetration includes ServiceNow's Agent Assist at about one-quarter of its customer base and Sierra's near-$16bn private valuation. The report text carries no explicit ratings or target prices.