AI makes software cheaper to build and more expensive to buy
Newsletter I Technology I October 2026
AI is changing the dynamics of the software market
Generative AI is changing not only how software is developed, but also where its strategic value lies. As companies can build applications around their own processes faster and at lower cost, the traditional choice between building in-house and buying software is once again being called into question.
That does not make software less valuable. Instead, value is shifting from code to the technology, data, workflows, governance, and distribution capabilities that are difficult to replicate. In the latest Oaklins Technology Newsletter, we examine what these developments mean for investments, valuations, and the next wave of Technology M&A.
The build-versus-buy trade-off is changing
Research among 817 customers and software developers shows that 35% have already replaced at least one SaaS solution with custom-built software. In addition, 78% expect to build more internal tools in 2026. However, buying software remains the more attractive option for regulated, standardized or business-critical processes.
Capital is flowing to a new generation of software companies
AI attracted a record US$243,9 billion in venture capital investment in 2025, accounting for more than half of global venture deal value. In addition to specialized technology investors, larger institutional and strategic players are also entering the market. As a result, AI-native software is evolving from a venture theme into a broader investment category.
AI does not automatically lead to a valuation premium
The market is increasingly drawing a sharper distinction between companies that add AI to existing products and those that can own a strategic part of the enterprise technology stack. Recent funding rounds have demonstrated high valuation multiples, but sustainable valuations require more than AI functionality alone. Commercial scale, business-critical workflows, proprietary technology, strong governance, and high switching costs are becoming key differentiators.
M&A follows the funding wave
The large funding rounds of recent years have helped establish a new generation of AI-native market leaders. As technologies mature and market positions become clearer, the foundations for consolidation are strengthening. Established software companies will pursue acquisitions to accelerate their AI roadmaps, while AI-native players can use M&A to expand their technology capabilities, customer bases and distribution networks.
Download the full Oaklins Technology Newsletter for an in-depth analysis of the evolving software landscape, recent funding rounds, valuation trends and transactions shaping the next phase of Technology M&A.
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