The AI boom is over - here's your bubble -2-

Waystar (WAY): This platform processes more than $6 billion in healthcare payment transactions a year, reaching 50% of U.S. patients. With 42% margins, you'd expect a richer valuation, but Waystar trades at about seven-times sales - a far cry from bubble territory.

Next, look at the enterprise SaaS (software-as-a-service) leaders where AI genuinely enhances products, rather than cannibalizing core businesses:

Atlassian (TEAM): Atlassian's growth remains solid - fiscal 2025 fourth-quarter revenue rose 22% year over year to $1.38 billion - and the company is leaning into AI as a core pillar. Its centerpiece is Atlassian Rovo, an AI "teammate" introduced in May 2024 that layers search, chat and AI agents across Jira, Confluence and other tools to help teams find information, summarize work and automate workflows. With a base of more than 300,000 customers, deeply embedded products (Jira, Confluence) and a potent AI layer, Atlassian is one of the purer enterprise SaaS AI plays.

DocuSign (DOCU): Shares of DocuSign tumbled at the end of September after headlines framed OpenAI's new "DocuGPT" as a competitive threat. In reality, DocuGPT was presented as an internal OpenAI agent that converts contracts into structured, searchable data - not an e-signature platform or commercial DocuSign replacement.

The selloff overlooked DocuSign's real strength: its entrenched legal-compliance infrastructure, enterprise integrations and a growing Intelligent Agreement Management (IAM) platform that uses AI to analyze and manage contracts end to end. These capabilities are deeply embedded across regulated industries and supported by the company's roughly $900 million in annual free cash flow, allowing continued investment and share repurchases. With AI enhancing - not replacing - its core workflow moat, DocuSign remains one of the most undervalued enterprise automation plays amid AI-driven market confusion.

Adobe (ADBE): Adobe reported $6 billion in revenue for the third quarter of fiscal 2025, up roughly 11% year over year, with non-GAAP EPS of $5.31. The company also noted that its AI-influenced annual recurring revenue surpassed $5 billion, and its generative-AI-model family (Adobe Firefly) has already produced more than 24 billion pieces of content. Despite this, the stock trades at a price-to-earnings multiple of just 21 - well below its historical 10-year average of 50.

The thesis is brutally simple: These companies boast loyal users, documented time- and cost-savings tools, and deep integration that customers keep paying for regardless of headline volatility. They aren't betting on the farm on AI; they're using it to widen existing competitive moats and improve unit economics.

Your bubble-management playbook

42% of companies abandoned AI initiatives in 2025, up from 17% in 2024.

The timeline for maximum disruption in AI runs from the beginning of 2026 until the third quarter of 2027. This is the point when both the AI pilot launches that haven't produced a return on investment and the 2021-2023 AI startups run out of capital. S&P Global Market Intelligence reports that 42% of companies abandoned AI initiatives in 2025, up from 17% in 2024, with the average organization scrapping 46% of AI proof of concepts before production.

This creates the framework for a slow-motion AI-bubble deflation, rather than a catastrophic burst:

-- Tier 1 hyperscalers with diversified revenue will weather disappointing AI returns.

-- Tier 2 unicorns face valuation compression or acquisition.

-- Tier 3 experiences mass casualties, with a small cohort of survivors demonstrating actual unit economics.

The three plays outlined above position investors for this selective deflation: buying Tier 1 quality on 15% to 20% corrections; positioning in data-center infrastructure ahead of verified 2027 constraints; and accumulating profitable companies - whether routine automation or mispriced SaaS - being unfairly sold off alongside failing startups.

The AI bubble is deflating on schedule - but the infrastructure buildout and automation revolution remain genuine opportunities for investors who can distinguish between speculative AI startups burning cash and profitable enterprises solving real problems with measurable returns.

More: These stocks are the real deal for investors in AI - Wall Street is just chasing bubbles

Also read: Here's one question about the AI bubble that even ChatGPT can't answer

-Jurica Dujmovic

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11-01-25 1119ET