February 13, 2025

When Markets Break Twice in the Same Week

The "SaaSpocalypse" has hit global markets with devastating force this week. A $300 billion valuation wipeout in the U.S. has spiraled into a global contagion, dragging India’s IT index to its worst session since 2022 as giants like TCS and Infosys plummeted over 7%.

The catalyst was Anthropic’s new automation plugins, launched earlier this month, which investors fear will disintermediate traditional software and professional services. High-profile casualties include Thomson Reuters and London Stock Exchange Group, which saw double-digit crashes as AI begins automating legal and data workflows. From Salesforce to Sage, the shift from "per-seat" subscriptions to autonomous AI agents has triggered "get me out" style selling, leaving the once-resilient SaaS sector grappling with a fundamental existential crisis.

Despite the panicked selling seen since the end of January, major institutional players like JPMorgan have been arguing that the market is pricing in a "doomsday scenario" that ignores the fundamental structural advantages of established software giants.

This implication to ‘buy the dip’ sits well with bulls, considering that while AI agents can automate workflows, they still need a "brain" to read from and write to. Analysts argue that incumbents like Salesforce, ServiceNow, and SAP own the "System of Record"—the proprietary, governed data layer that AI requires to be accurate.

As AWS CEO Matt Garman recently noted, these incumbents have an "inside track" because enterprises won't trust autonomous agents that aren't grounded in their existing, secure data silos.

Translation: While the retail herd is trampling each other to exit the SaaS building, the "smart money" is quietly shopping for bargains in the rubble..

Still No Recovery for Microsoft

It has been a rough few weeks for Microsoft (MSFT). The stock hasn't just failed to recover; it has entered a period of "choppy" decline as investors shift from excitement about AI to a cold, hard look at the balance sheet.

Two weeks ago, Microsoft reported what looked like a remarkable quarter on paper, but the market reacted with a great deal of fear. The sell-off wasn't just a random dip; it was a fundamental shift in how investors view the AI revolution. Its revenue had climbed by 17% year-over-year, and beat expectations of $80.2 billion. Similarly, earnings per share jumped 24% at $4.14 and also beat expectations of $3.93.

The panic seems to go back to the bombshell CapEx anouncement. Microsoft reported a massive $37.5 billion in capital expenditures for a single quarter—mostly for AI infrastructure. Investors are starting to panic that the "payoff" for this spending is too far in the future, especially as margins have slightly compressed.

Similarly, while Azure grew 37%, it didn't "blow the doors off" as many had hoped, leading to fears that supply constraints for AI chips (GPUs) are capping Microsoft's ability to grow, even as they spend billions.

The silver lining however, is that while the stock price is hurting, the fundamentals remain surprisingly strong. Microsoft actually beat earnings and revenue expectations ($81.3B vs. $80.2B expected).

Many analysts argue the stock is now "oversold" and is trading at a much more attractive valuation than the 35x P/E we saw last year.

Micron Still Defiantly Looks Upward

Micron (MU) is currently the "golden child" of the tech world because it is doing the exact opposite of Microsoft: while Microsoft is spending billions on a dream, Micron is collecting billions on a shortage.

The stock has climbed by 24% this month, and is pushing up the all-time high ceiling once—something that Micron is not new to.

The biggest reason for the decoupling happened on February 11. Micron’s CFO, Mark Murphy, shocked the market by announcing that Micron has already started mass production and shipping of HBM4 (High Bandwidth Memory).

Everyone thought they were a year away. By shipping now, they have potentially leapfrogged their main competitors (Samsung and SK Hynix). In fact, it seems quite apparent to many that Micron has essentially secured their spot in Nvidia’s next-gen "Vera Rubin" chip architecture.

When a company has zero unsold inventory and high demand, they have "pricing power." They can keep raising prices, which protects their profit margins even if the rest of the market gets shaky.

Earlier this month, a rumor circulated (started by research firm SemiAnalysis) that Micron had been kicked out of Nvidia’s supply chain because their chips were too slow. The CFO personally went on stage at the Wolfe Research conference two days ago to call those reports "simply inaccurate" and confirmed their chips are actually exceeding performance benchmarks (11 Gbps+). Clearly, that "rebuttal" acted like rocket fuel for the stock.

Strategy Spotlight: Deep Tech

When markets fracture like this, stock picking becomes a minefield.

Software gets crushed on automation fears. Infrastructure rips on supply shortages. Capital rotates violently between “AI is overhyped” and “AI changes everything.” In this kind of regime, reacting emotionally is expensive.

This is exactly where Surmount’s Deep Tech Innovators Thematic Strategy earns its place.

Because the goal is not to guess the next headline.

The goal is to systematically find the Microns of the market.

Surmount’s Deep Tech strategy is built to identify those structural beneficiaries across the AI stack:

• Semiconductors powering model training
• Memory leaders riding capacity shortages
• Cloud platforms anchoring enterprise workloads
• Cybersecurity firms protecting autonomous systems
• Enterprise software owners of the system of record

Instead of concentrating risk in one layer, the strategy spreads exposure across the full deep tech ecosystem. That matters because AI value does not accrue evenly. It rotates.

The monthly rebalance forces discipline. It trims positions that have outrun fundamentals and reallocates toward companies where financial strength and forward upside are mispriced. In volatile conditions, that systematic recalibration is an advantage.

When the crowd is panic-selling software on existential fears, there are companies quietly shipping breakthrough hardware. When investors obsess over near-term CapEx compression, there are suppliers collecting pricing power. When narratives collapse, real innovation does not.

Of course, no thematic strategy is immune to volatility. But when markets swing wildly between fear and euphoria, and most decisions are driven by headlines rather than fundamentals, a systematic framework for identifying financially strong, structurally advantaged innovators can create an edge.

In a space where noise dominates, disciplined exposure to real deep tech winners is what separates conviction from chaos.

What's Actually Happening

So to summarize the SaaS selloff developments of this week

First: AI is reorganizing the value chain in real time. Software sold off on existential fear, while infrastructure names surged on tangible demand. Capital is not leaving tech. It is rotating within it.

Second: Markets are repricing duration risk. Microsoft wasn’t punished for weak numbers. It was punished for massive upfront AI spending with payoffs pushed further out. Investors want cash flows now, not promises later.

Third: Scarcity wins in chaos. Micron rallied not on hype, but on supply discipline, early HBM4 shipment, and pricing power. In uncertain regimes, the companies closest to bottlenecks gain leverage.

Watch whether software reclaims narrative control through earnings, or whether infrastructure continues absorbing the capital. Because this isn’t a normal correction.

It’s a redistribution of power across the AI stack..