The Dead Stocks That Are Quietly Beating AI

Key takeaways

Software and API layers are critical components in modern business infrastructure, enabling easy integration of communication functionalities.
Communication software stocks like Twilio and Bandwidth have demonstrated resilience and potential growth, driven by their roles in AI and embedded services.
Rising costs of AI token usage may influence enterprise spending, but overall, software remains essential for automation and growth.
Investors should focus on fundamentals such as revenue growth, profit margins, and strategic relationships rather than hype or market trends.
Thorough research and question-driven analysis are key to developing robust investment theses and avoiding herd mentality.

Summary

Introduction to Software and API Layers

The podcast begins with a discussion on the evolution and structure of the software industry, emphasizing the importance of the API layer as a product layer that enables companies to embed functionalities like messaging and notifications into their apps. The hosts highlight how APIs from companies like Twilio and Bandwidth serve as building blocks for software, making it easier for businesses to add communication features without developing them from scratch.

Performance of Communications Software Stocks

The hosts analyze why stocks of communication software companies such as Twilio and Bandwidth have bucked the overall software decline during the 'software apocalypse.' Factors include their already low valuations coming into the downturn, their customers' stickiness, and recent re-acceleration of revenue driven by their role in supporting AI integrations. Financials such as revenue growth, profitability, cash flow, and balance sheets are examined to understand their resilience and prospects.

Impact of AI on Software Investments and Business Models

The discussion shifts to the influence of AI and associated investments, like token spending, on software companies. The hosts debate whether enterprises will reduce AI infrastructure spending due to rising costs and how this could affect SaaS vendors. They argue that despite current trends, software remains fundamental for business automation and growth, and companies are finding new ways to bundle AI capabilities into their existing offerings.

Conclusion and Key Takeaways for Investors

The hosts conclude by emphasizing the importance of conducting thorough analysis and developing strong investment theses. They caution against hype and highlight that the underlying fundamentals, like revenue trajectories and strategic positioning, are critical. They also mention how their research tools are designed to help investors scrutinize and understand these companies deeply.

Show notes

While the market chased AI names, communications software stocks like Twilio (TWLO) and Bandwidth (BAND) quietly re-accelerated. Here's what the financials actually show — and whether these forgotten names deserve a spot in your portfolio.

CSI breaks down two API-layer software companies left for dead after the pandemic era that are now showing signs of fundamental re-acceleration. We analyze quarterly revenue trends, operating profit trajectory, and free cash flow for both — including the key distinction between Twilio's headline revenue and organic revenue (stripping out carrier pass-through fees).

We also cover Bandwidth's emerging relationship with Salesforce as a voice-powered AI agent infrastructure provider, and what that means for future revenue growth.

Plus, we address the macro question investors are asking: if enterprises pull back on AI token spending, does that actually send them back to SaaS vendors? We break down both sides of that thesis.

This is a fundamentals-first look at an under-covered corner of the software market — no hype, just the numbers.

🔒 This episode features an excerpt from one of our CSI Live sessions — exclusive to Semi Insider members. Join to access our full library of live analysis, deep dives, and member Q&As:https://chipstockinvestor.com

📺 Watch the related YouTube video — we called this back in April:https://www.youtube.com/watch?v=fHcvCip1-tQ

Content is for general informational and entertainment purposes only and does not constitute specific investment advice. All investing involves risk. Nick and Kasey do not own shares of Twilio or Bandwidth.