The Sage Group PLC (LSE:SGE), Craneware PLC (AIM:CRW) and Cerillion PLC (AIM:CER) are trading at valuations last seen between 2010 and 2014, and Peel Hunt reckons the market has confused two very different things: coding and software.
That is the sharp end of a new thematic research note from the broker's AI team. Titled "Code is dead, long live software," it argues that the first quarter's software sell-off, the so-called SaaSpocalypse, rested on flawed logic.
AI writes code; code is software; therefore, software is finished. Peel Hunt says that confuses the medium with the moat.
Why the sell-off got it wrong
The broker's case is that AI is commoditising coding, not the decades of workflow embeddedness, regulatory encoding and institutional trust that sit underneath B2B software.
It draws a comparison with radiologists. Nobel laureate Geoffrey Hinton predicted their decline back in 2016 because of AI-driven image analysis. Instead, numbers rose as automation freed up time previously spent on administrative tasks.
Peel Hunt sees a similar pattern playing out in software.
The analysts lean on Jevons' paradox: every time the cost of building software has fallen, more software gets built, not less.
Offshoring and cloud computing powered the last decade's growth by lowering production costs. AI-driven developer productivity is framed as the next leg, expanding a software market worth more than one trillion dollars into a labour market worth more than sixty-five trillion dollars.
The stock picks
Peel Hunt names five UK-listed beneficiaries, all rated 'buy'.
Sage, the accounting software provider, gets credit for a 102% renewal rate and 11% annual recurring revenue expansion in its first-half results.
Cerillion, the telecoms billing specialist, benefits from consolidation among rivals, including Amdocs and NEC-Netcracker, which the broker says is driving vendors out of the market.
Craneware is positioned as essential infrastructure for hospital revenue-cycle management, a task the broker argues AI cannot replicate without twenty years of compliance history.
Softcat PLC (LSE:SCT) and Bytes Technology Group PLC (LSE:BYIT, FRA:9NY, JSE:BYI), the value-added resellers, round out the basket as beneficiaries of AI-driven procurement complexity.
The broker's most pointed line concerns execution rather than technology.
It reckons even Anthropic, one of the most capable AI companies, still runs on Workday Financials, Salesforce and MuleSoft to scale its own operations, evidence that incumbent software retains genuine staying power.
Peel Hunt puts the window for incumbents to adapt at two to three years before AI-native rivals close the gap.
Notably, the note stops short of publishing its stock-by-stock scoring against its own framework, on moat quality, pricing readiness and execution discipline. That analysis, the broker says, is reserved for institutional clients face to face, a decision it frames as consistent with its own thesis: that the deepest insights are the ones too tacit and relationship-held for a language model to absorb.
