Artificial intelligence is creating a high-impact feedback loop that is reshaping the economics of enterprise software, according to a recent report by Citrini Research. This dynamic is causing disruptions in the software-as-a-service (SaaS) sector while also driving growth for companies like Nvidia that provide AI infrastructure.

The AI feedback loop: Disruption in motion

Citrini Research describes a self-reinforcing cycle where companies use AI to reduce labor costs, reinvest savings into further AI development, and, in turn, accelerate the same disruption that led to those labor reductions. A recent report summarizes this phenomenon as "a feedback loop with no natural brake", where "AI capability improves, payroll shrinks, spending softens… capability improves."

This cycle is now starting to affect SaaS business models, which traditionally rely on recurring revenue and high switching costs to maintain profitability.

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SaaS pricing power under pressure

The adoption of agentic coding tools such as Claude and Codex is challenging the pricing power of SaaS companies. Citrini Research notes that these tools enable a "competent developer" to replicate the core functions of a mid-market SaaS product in just weeks. As a result, enterprise customers are gaining leverage in contract negotiations with SaaS providers and seeking significant discounts.

In one example cited in the report, a Fortune 500 company was able to renew a major SaaS contract at a 30% discount after exploring internally developed AI tools as an alternative. This shift highlights how AI is fundamentally altering the dynamics between SaaS providers and their customers.

Nvidia and AI infrastructure: A clear winner

While SaaS companies face challenges from the evolving AI landscape, companies like Nvidia, which power AI infrastructure, are thriving. Citrini Research reports that "NVDA was still posting record revenues" as demand for AI compute resources remains high. AI infrastructure providers are operating at near-full capacity, benefiting from the very disruption AI is causing across other sectors.

This divergence signals a shift in market leadership, as companies delivering the foundational infrastructure for AI growth are poised to capture a larger share of economic gains. "As AI reduces the value of human labor and software intermediaries, the companies providing the underlying compute may capture a growing share of economic gains", the report explains.

The broader implications

The evolving feedback loop of AI adoption is creating winners and losers across industries. While SaaS companies contend with the unintended consequences of the technology they helped popularize, infrastructure providers like Nvidia are emerging as clear beneficiaries in this rapidly changing environment. As AI continues to advance, its impact on the economy and market dynamics will likely grow even more pronounced.

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