Legacy Software Firms Like SAP, Oracle, and IBM Achieve Record Valuations Driven by Cloud and Artificial Intelligence Adoption

January 21, 2025February 6, 2025 EquityExplained

The article discusses how legacy software firms, such as SAP, Oracle, and IBM, are benefiting from the rise of artificial intelligence (AI) despite being traditional companies. These companies have been able to adapt and capitalize on the growing demand for AI by investing in cloud transitions and strategic acquisitions.

The article highlights several reasons why these legacy firms are thriving:

Established market presence: They already have a stable customer base, which provides them with a solid foundation to build upon.
Cloud transitions: Their transition to the cloud has allowed them to tap into the growing demand for AI, which is heavily dependent on cloud infrastructure.
Strategic acquisitions: These companies are using strategic acquisitions to bolster their offerings and stay competitive in the market.

The article also notes that while AI might be lifting all boats at present, it’s likely that interest in new technology will wane as the "hype cycle" (Gartner’s concept) predicts a "trough of disillusionment" where early experiments and implementations fail to deliver on their promise. This could have implications for the many billion-dollar generative AI startups.

Key takeaways:

Legacy software firms are benefiting from the rise of AI due to their established market presence, cloud transitions, and strategic acquisitions.
These companies are well-positioned to capitalize on mainstream adoption of AI when it truly takes off.
The "hype cycle" may predict a downturn in interest for new technology, which could have implications for AI startups.

Related news:

IBM’s $6.4 billion bid for HashiCorp and SAP’s plans to pay $1.5 billion for WalkMe are strategic acquisitions aimed at bolstering their hybrid cloud ambitions.
Alphabet, Amazon, and Microsoft have all hit record highs due to the growing demand for AI.
Apple’s shares also reached an all-time high after its recent AI announcements.

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