Anthropic product event shows competition risk to software overblown: Wedbush

[Wall Street Christmas Tree]
cmart7327

Following Anthropic's (ANTHRO [https://seekingalpha.com/symbol/ANTHRO]) product event, Wedbush (IVES [https://seekingalpha.com/symbol/IVES]) said that competition risk to software is overblown.

Analysts led by Dan Ives said that Anthropic hosted its Enterprise Agent event, where the company provided product updates that make Claude Cowork effective for enterprises. The company showed live demos from senior leadership across enterprises with an increased focus on agent-based workflows and enterprise integration.

The use cases included Spotify (SPOT [https://seekingalpha.com/symbol/SPOT]) for reduced engineering time on complex code migrations, Novo Nordisk (NVO [https://seekingalpha.com/symbol/NVO]) for improved clinical study documentation timelines, and Salesforce (CRM [https://seekingalpha.com/symbol/CRM]) for reduced timelines in Slack.

"While these use cases are impressive, the reality is that these new AI tools will not rip and replace existing software ecosystems and data environments with these AI tools only as useful as the data it can reach," said Ives and his team.

Wedbush highlighted some key takeaways from the product demo.

FOUNDATION MODELS DO NOT EQUAL ENTERPRISE-GRADE SOFTWARE PLATFORMS

The analysts said that the market is conflating foundation model capability with full enterprise software replacement, and the fear that generative AI will 'rewrite legacy systems overnight' ignores enterprise reality.

"Anthropic and OpenAI demos showcase raw model intelligence, not workflow orchestration, compliance infrastructure, auditability, security controls, integrations, billing systems, uptime guarantees, or enterprise grade SLAs [Service Level Agreements]," said Ives and his team.

The analysts added that companies like Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]), Salesforce (CRM [https://seekingalpha.com/symbol/CRM]), ServiceNow (NOW [https://seekingalpha.com/symbol/NOW]), and Pegasystems (PEGA [https://seekingalpha.com/symbol/PEGA]) are deeply embedded workflow systems of record, and replacing them would require ripping out mission-critical infrastructure, not simply layering in a large language model, or LLM.

AI INCREASES COMPLEXITY, COMPLEXITY EXPANDS CYBER SPEND

Ives and his team said that AI agents and autonomous workflows dramatically increase the attack surface — more Application Programming Interfaces, or APIs, more machine identities, more lateral movement risk, and more cloud-native workloads. AI does not reduce the need for endpoint, identity, cloud, and Security Operations Center, or SOC, automation, it multiplies it, the analysts added.

The analysts noted that the more enterprises deploy LLM-powered agents, the more run-time monitoring, identity governance, model security, and zero-trust enforcement they require. CrowdStrike (CRWD [https://seekingalpha.com/symbol/CRWD]), Palo Alto Networks (PANW [https://seekingalpha.com/symbol/PANW]), and Zscaler (ZS [https://seekingalpha.com/symbol/ZS]) are winners and not losers in this AI world, according to the analysts.

DISTRIBUTION WINS IN ENTERPRISE SOFTWARE, NOT MODEL PERFORMANCE

The analysts said that Anthropic and OpenAI (OPENAI [https://seekingalpha.com/symbol/OPENAI]) do not have a 20-year enterprise distribution network, chief investment officer, or CIO, relationships, or embedded vertical workflows. Salesforce, ServiceNow, and Microsoft sit at the application layer where business logic lives.

"The Anthropic/OpenAI releases increase urgency to automate workflows, which strengthens the strategic importance of these platforms rather than weakens them. If anything, AI urgency is accelerating deal cycles. AI is more likely to drive a modernization cycle than bypass the installedbase as AI is lowering the friction of legacy transformation projects," said Ives and his team.

VALUATION COMPRESSION IS DISCONNECTED FROM FORWARD EARNINGS RISK

The analysts said that the magnitude of multiple contractions implies structural revenue impairment. Yet there is no evidence of customer churn acceleration, budget freezes or competitive displacement in reported results, the analysts added. The market is reacting to demo risk, not data risk, according to the analysts.

In addition, Ives and his team said that concerns around Microsoft (MSFT [https://seekingalpha.com/symbol/MSFT]) are overblown and noted that it is a major buying opportunity for the biggest tech name.

The analysts also said that the IBM (IBM [https://seekingalpha.com/symbol/IBM]) sell-off was unwarranted. The analysts noted that IBM remains deeply embedded in mission-critical mainframe environments running decades-old COBOL-based systems, and even if AI accelerates code translation or modernization, enterprises still require structured migration, compliance validation, and systems integration, such areas where IBM already has deep relationships in monetizing services and infrastructure.

"AI is more likely to drive a modernization cycle than bypass the installed base as AI is lowering the friction of legacy transformation projects," said Ives and his team.

MORE ON ANTHROPIC AND WEDBUSH

* IVES: Too Risky In This Tech-Heavy Market (Rating Downgrade) [https://seekingalpha.com/article/4865148-ives-etf-too-risky-in-this-tech-heavy-market]
* IVES: This AI Fund Probably Won't Deliver Long-Term Alpha [https://seekingalpha.com/article/4849377-ives-ai-fund-probably-wont-deliver-long-term-alpha]
* Anthropic softens AI safety policy to stay competitive [https://seekingalpha.com/news/4556427-anthropic-updated-responsible-scaling-policy-ai]
* Hegseth gives Anthropic deadline to remove safeguards; threatens use of Defense Production Act: report [https://seekingalpha.com/news/4556116-hegseth-gives-anthropic-deadline-to-remove-safeguards-threatens-use-of-defense-production-act-report]
* Seeking Alpha’s Quant Rating on Anthropic [https://seekingalpha.com/symbol/ANTHRO/ratings/quant-ratings]