(And How to Profit Before the Buffet Closes)
Here is the history, data, and research to support my core AI thesis: apps will be bigger than Infrastructure, and we are only at the beginning of the App Era.
Remember when everyone thought the big money in cloud was owning the data centers? Cute. Twenty-ish years later, the SaaS layer is already 2-3× larger than core IaaS. Infra keeps the lights on; apps print the money. Same movie, new cast. This time, the star is AI, and the sequel’s budget is bigger.
Scene 1 — The Prequel We All Watched
- 2024 SaaS box-office: midpoint ≈ $330 B¹²³⁴
- 2024 public IaaS: $140–172 B⁵⁶
Call it $1 of infra supporting $2-3 of apps. Infra is the appetizer; apps are the entrée.
Scene 2 — Cut to the Present
- AI infra (GPUs, fancy clouds, pixie dust): $135.8 B⁹
- AI software + services: $233.5 B¹⁰
Boom—apps are already ~1.7× infra before the end credits roll. In generative AI, the software slice is 64 % of a $16.9 B pie¹¹ and growing faster than the silicon underneath it. Although most of what passes for AI apps today are actually development tools like Cursor and Replit, etc. There is still a paucity of apps solving real B2B business problems with complex logic. That is where Incisive Ventures is investing.
“But Martin, GPUs are the new oil!”
Sure—and Chevron never out-grew Apple. Value accrues where pain is killed, not where electrons wiggle. There is still alot of pain to kill in B2B processes, mostly by having computers pick up the intellectual work many humans do today (and not done by today’s SaaS).
Why the Stack Tilts Upward
- Infrastructure Commoditization gravity. Yesterday’s breakthrough tensor core is tomorrow’s Costco special. Prices fall, margins compress, repeat.
- Workflow glue. Apps lodge themselves between an employee and their KPIs. Rip-and-replace a chip? Fine. Rip-and-replace a revenue dashboard your CRO lives in? Good luck.
- Pricing power = painkiller power. When software turns a 60-minute task into a 6-second “Explain this PDF to my boss” button, the CFO pays and smiles.
Where the Money Runs Next
- Vertical copilots. Think “Salesforce, but it closes the deal for you.”
- Agentic back-office. Month-end close without the espresso IV drip.
- Domain-specific insight engines. Your proprietary data, custom integrations, a bespoke model, and zero interns.
The 3-Step Playbook (AKA How to Surf the Tsunami)
| Step | What You Actually Do | Why It Works |
|---|---|---|
| Find the hair-on-fire use-case | Talk to users, not GPU vendors. | Pain > novelty every day. |
| Borrow, don’t build, the model | Foundation models are falling in cost faster than your deck ages. | Cap-ex is for suckers; wrap value around UX + data. |
| Price on delivered ROI | % of cost saved or revenue gained. | Keeps you out of the race-to-zero with infra providers. |
Cue the Skeptics
- “Won’t infra revenue also explode?”
Of course. Explosions are loud, but they’re still smaller than the city they happen in. - “Apps need infra, so infra wins.”
Gas stations needed roads; Exxon isn’t richer than the GDP riding on asphalt.
Investor Take-Home
- Infra multiples peak early. By the time CNBC is screaming “GPU shortage,” the upside is priced in.
- Application valuations lag then moon. SaaS history 101: first the infra IPOs, then the Snowflakes, then the vertical winners. Same dance card.
- Bet the ratios. If apps are ~2× infra today, history says 3× isn’t far off. As many AI apps are creating whole new categories, apps could easilly be 4-5x Infra. Place your chips accordingly.
Founder Cheat-Sheet
- Own the data exhaust your users create. That’s the moat.
- Ship workflow, not widgets. Interfaces beat APIs in budget meetings.
- Raise more than you think. Infra bills drop, but distribution still eats cash.
Final Word
Infra is necessary. Applications are inevitable. The money knows the difference. If you missed SaaS before it was cool, congratulations—AI just handed you the reboot. Grab the popcorn, skip the servers, and buy the apps.
— Martin G. Tobias
Sources
- Fortune Business Insights, Software as a Service Market Size, 2024
- Grand View Research, SaaS Market Report, 2024
- Precedence Research, SaaS Market Size, 2024
- Market.us, SaaS Market Size, 2024
- Gartner, Worldwide IaaS Public Cloud Services Revenue, 2023
- Gartner, Worldwide IaaS Public Cloud Services Market Growth, 2024
- Synergy Research Group, Cloud Infra Services Revenue, 2024
- Precedence Research, IaaS Market Size, 2024
- MarketsandMarkets, AI Infrastructure Market Size, 2024
- Fortune Business Insights, Artificial Intelligence Market Size, 2024
- Grand View Research, Generative AI Market Report, 2024
- Grand View Research, AI Apps Market Report, 2024
- Grand View Research, AI as a Service Market Report, 2024
