Wall Street keeps trying to frame GenAI like a meteor: “Consultants and outsourcers are toast.” That’s the lazy take — and it’s why this corner of the market keeps trading like a doomsday headline generator. The reality is messier… and that’s exactly the point. The future isn’t “buy a model, fire the vendors.” The future is a fragmented agent stack where enterprises still need someone to stitch the whole thing together: proprietary data, governance, systems of record, security, evaluation, monitoring, workflow orchestration, compliance, and “who gets blamed when it breaks?” AI can write code, draft policies, and summarize tickets… but it still can’t magically integrate 12 systems, reconcile conflicting data definitions, satisfy legal/compliance, and refactor a decade of duct-taped workflows into something reliable. In other words: services don’t disappear — they migrate up the stack toward high-value integration, domain-specific implementation, and “agent factories” that actually work in production.

Here’s the twist (and it’s the real trade): buyers don’t think the wallet is infinite. Near-term, budgets look resilient because adoption itself is work. But longer-term, the goal is absolutely cost takeout — especially in labor-heavy, repetitive outsourcing. In a survey of senior IT decision-makers, 47% expect to spend more on IT services in the next 1–3 years (44% neutral), but that confidence fades with time: by 5+ years out, the “spend less” camp grows meaningfully. Translation: there’s a window where services benefit from the chaos… and then the bill comes due. And that’s why the tide won’t rise evenly. The winners won’t be the biggest headcount shops — they’ll be the firms that can sell IP-led, outcome-based work (and defend pricing) while everyone else gets squeezed by “Why are we paying per FTE when the workflow runs on tokens?”

The best way to think about this isn’t “AI winner vs AI loser.” It’s: who can convert AI from labor substitution into a higher-margin product — and who gets trapped selling shrinking units of human time.

The firms best positioned tend to show up with the same advantages:

If you want to build a short, clean basket of AI services winners and losers, don’t overcomplicate it:

If you want to keep it tight: ACN / EXLS / EPAM as the “quality core,” with G / CTSH / GLOB as the higher-beta add-ons.

If you want a simple “hurt basket,” it’s: DXC + DAVA (and optionally CINT/GDYN as higher-volatility satellites).

If you believe the market is overpricing “services get disintermediated tomorrow,” you don’t buy “services.” You buy the handful of firms that can sell AI outcomes and use AI internally to protect margins while the rest of the sector fights over shrinking labor hours.

The biggest tell: buyers increasingly expect AI to reduce spend in legacy outsourcing over time — but not immediately. So the setup is asymmetric:

Continue to watch oil. We did a podcast today and the guest referred to it as nature’s tax….

News came out last night that the Treasury was going to announce measures to reduce oil prices, perhaps using futures markets. Not quite sure how they will do that, but just announcing it may calm things down. Politico reported that the conflict could last another 100 days, or longer.

Markets did close way off the lows yesterday, but a daily chart of the QQQ still shows a choppy market going nowhere. Would expect this continues until we get some resolution, and relief on oil prices…..

Meanwhile, rates continue to rise. Remember, in a crisis investors are supposed to flock to US Treasury Bonds, therefore reducing rates, they are not….

Higher oil prices and rates are inflationary, hard to expect the Fed to aggressively cut rates in this environment.

Been talking a lot about CRWD lately as we thought it was unfairly targeted in the software selloff. Undercut and rally at the 10 day MA and 20 day EMA. Next potential stop is the 50 and 200. It’s up a lot over a short period of time so a pause would be likely.

CrowdStrike (CRWD) is one of the cleanest “AI-era winners” in security because AI doesn’t reduce the need for endpoint + identity + cloud protection—it scales the attack surface (automation, phishing, deepfakes, faster vuln exploitation), which increases the value of CRWD’s real-time telemetry and response loop. What I like most right now is the platform flywheel: management continues to show strong net-new ARR and a “beat/raise” cadence, and Falcon Flex keeps lowering procurement friction and accelerating multi-module adoption (customers buy the platform, then expand into more workloads). The next leg to watch is next-gen SIEM + identity—if those keep comping strong while cloud remains healthy, CRWD starts to look less like “endpoint security” and more like the system-of-record for enterprise threat + identity risk. The main near-term risk is seat compression (layoffs → fewer endpoints) and budget scrutiny, so the key tells are: net-new ARR quality, Flex expansion rates, module attach, and whether SIEM/identity growth offsets any seat-driven softness.

I had the pleasure of speaking about UFOD on Stocks on Spaces Wednesday. Strangely we got cut off right as we were talking about potential Raytheon technology, so it’s in two parts…..

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