I'm Watching These 2 SaaS Stocks While Everyone Else Panics About AI

Software-as-a-service stocks sold off last week, apparently in reaction to Anthropic launching a preview of its new Cowork feature. Cowork essentially takes Claude Code, Anthropic's red-hot AI coding assistant, and generalizes it for non-coding tasks. Cowork can read and write files on a user's computer directly, search the web, and complete a variety of tasks. Cowork appears to be a meaningful step forward toward a true digital assistant.

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Fears about AI disrupting the software industry are not new. Microsoft CEO Satya Nadella remarked in late 2024 that "SaaS is dead." In late 2025, IDC predicted that the standard per-user, per-month pricing for SaaS applications would be obsolete by 2028, with 70% of software providers forced to switch pricing models. Cowork is a preview of what might be possible in the future, with AI agents interacting directly with applications and data, rather than the user.

AI isn't going to replace all software, but the software industry is almost certain to transform dramatically over the next few years as agentic AI becomes more capable. The stock market is panicking, but long-term investors should be looking for great opportunities amid the chaos. Two SaaS stocks I've got my eye on are Paycom (NYSE: PAYC) and UiPath (NYSE: PATH).

Paycom is ahead of the game with Beti

In 2021, payroll software provider Paycom disrupted itself with the launch of Beti, an automated platform that enabled employees to do their own payroll. Beti was so good at eliminating errors and saving employers time that Paycom suffered a decline in other types of revenue. This slowed overall growth, but the upside was that Beti delivered incredible value to Paycom's clients.

AI doesn't appear to pose a meaningful threat to Paycom's business model, at least not directly, because the company already sells outcomes with Beti. Paycom has also been incorporating AI in various ways, including the launch of IWant in mid-2025. IWant is an AI product that enables users to ask questions about their data through voice or text, pulling directly from the single database that powers all of Paycom's products. "IWant is the biggest release since our founding in 1998," said CEO Chad Richison.

Paycom stock has tumbled by more than 70% since peaking in late 2021, and it's down more than 40% from its 52-week high. Revenue growth is solid but not stellar, with sales up 9% year over year in the third quarter of 2025. However, Paycom remains incredible profitable, with a 22% GAAP net income margin.

The one risk AI poses is not the technology itself, but rather its potential impact on the job market. If AI leads to slower hiring, layoffs, or meaningful business failures, Paycom could be negatively affected.

With Paycom stock trading for around 16 times the average analyst estimate for 2025 earnings, the valuation looks reasonable given the company's growth prospects. Paycom is still a small player in the payroll and HR software market, with revenue expected to be just over $2 billion in 2025. The company's early move to disrupt itself with Beti could give it an opportunity to steal market share from competitors as they grapple with a rapidly changing software industry.

AI without the downsides

Anthropic's Cowork feature is a warning to any software company that sells automation solutions. UiPath, a leader in robotic process automation, is not immune. However, UiPath has found a strategy that, so far, is working well in the age of AI: Combining RPA with AI to deliver solutions that avoid the downsides of each technology.

Large language models, no matter how advanced, are ultimately statistical token generators. It's incredible what they can do, but they still get things wrong and make mistakes. Grounding on real-world data can improve results, but LLMs are still prone to making things up and inventing sources.

RPA, on the other hand, is rules-based and deterministic. Given the same input, it's always going to do exactly the same thing. However, RPA can be brittle. If the website or application a "robot" is interacting with changes in any way, the entire workflow can break.

Combining the two technologies enables automation solutions that combine the determinism of RPA with the nimbleness of AI. "Our automation strategy, combining the reliability of deterministic automation with the intelligence and adaptability of agentic AI, continues to align with what customers want most: trusted enterprise-grade automation that delivers tangible ROI fast," noted CEO Daniel Dines during the most recent earnings call.

Like Paycom, UiPath is ultimately selling results, not software. Revenue grew by 16% year over year in the latest quarter, and a dollar-based net retention rate of 107% indicates that customers are expanding usage. AI opens the door to new forms of automation, and UiPath appears well-positioned to benefit from a growing market.

Trading at 21 times the average analyst estimate for full-year adjusted earnings, UiPath stock looks reasonably priced given its growth rate. The company will face new competition from AI-only solutions, but its platform is likely to remain more robust and deliver more predictable results for its customers. As the stock market punishes software stocks, UiPath is one to put on your watch list.

Timothy Green has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Paycom Software, and UiPath. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.