The AI Arms Race Is Destroying Balance Sheets

Anthropic just landed a $380 billion post-money valuation. If it went public tomorrow, retail investors would probably pay $500 billion. But behind the euphoria lies a graveyard of once-mighty software companies.

The Great Software Purge

Remember when ServiceNow, Workday, Atlassian, and Salesforce ruled enterprise software? Now they're being written off as the next Digital Equipment Corporation – obsolete relics in the age of AI.

The logic is brutally simple: "Why pay for expensive enterprise software when anyone can code with Anthropic to build something better?" Workday is so spooked that co-founder Aneel Bhusri is returning as CEO, replacing Carl Eschenbach who apparently couldn't articulate why companies should stick with their HR and finance software.

The Hyperscaler Spending Spree

Amazon just shocked Wall Street by raising its capex outlook to $200 billion – $53 billion more than expected. Google also issued a larger-than-expected 2026 capex guide. These aren't investments; they're defensive moves by companies terrified of becoming the next Bing.

Microsoft presents the most fascinating case study. They have 15 million paid Copilot subscribers out of 450+ million M365 commercial seats – a mere 3.3% adoption rate. Yet they're doubling down on their partnership with the "mercurial" Sam Altman, who "doesn't care at all about them and seems to outsmart them at every turn."

The Reality Check

Jim Cramer's behind-the-scenes conversations with CEOs reveal a different story. On camera, they praise AI as "remarkable." Off camera? They admit AI is mainly good for "dull, dirty, or dangerous" tasks – and right now, it's mostly just handling the dull stuff.

The problem with AI models making crucial errors means that no matter how many tokens they use or how little energy they conserve, one poorly timed mistake could lose you a client. As Cramer puts it: "Right now, it is just... worthless?"

The Anthropic Paradox

Anthropic CEO Dario Amodei's predictions have been "100% wrong," yet he's still hailed as a genius. That's not a bug – it's a feature of today's AI market, where credibility seems inversely correlated with accuracy.

The company claims it can protect against cyberattacks, but can it really match what CrowdStrike offers? "It might take four quarters for people to understand that," Cramer notes, "but by that time, it will be too late to buy CrowdStrike."

The Private Equity Problem

Firms like Thoma Bravo and Vista Equity Partners are sitting on portfolios of enterprise software companies that "went down in value after they were purchased with debt." If these PE firms were publicly traded, they'd be getting the same brutal treatment as the software stocks everyone's dumping.