The SaaSpocalypse Debate: Are AI Stocks Disrupting SaaS in 2026?

**SPEAKER_1** (0:01)
This is InvestTalk from KPP Financial, helping investors make sense of the markets one day at a time. Here's your host, Justin Klein.

**Justin Klein** (0:15)
Good afternoon, fellow investors. Welcome back to InvestTalk. This is our Tuesday, it is Tuesday, August 11th, 2026 edition of InvestTalk. It means it's one month away, one month to my birthday. So I guess it's my birthday month, let's call it. But this is an interesting market that we have in front of us, a lot to unpack for this hour. I'm Justin Klein and my goal here is to help you become a better investor. Bring you data, bring you perspective, develop over 25 years of investment experience. That's what I bring to you each and every day, myself and Luke. And we do that mainly by answering your finance and investment questions. So don't hesitate to give us a call. 888-99-CHARP is our number.
And I'll bring you some topics. I have some good ones today to discuss.
We're going to dig into all of that and much, much more. In just a bit, we'll talk about today's Mark performance. We'll run down the show topics for the hour. But first, let's tackle this color question now.

**Sarah** (1:18)
Good morning. This is Sarah from Pennsylvania.
My question is about DLR Preferreds. They are giving a good yield. And so I wonder what you think about the Preferreds as opposed to the stock itself. Thank you very much.

**Justin Klein** (1:40)
This is an interesting one. Okay. So DLR is Digital Realty Trust. This is a REIT that builds data centers. They've actually been building these data infrastructure centers for a long time. Way before AI was a big thing, when it was just cloud computing.
So their business has boomed, shall we say.
Funds for operation went from $5.659 in 2023 to $8.30 this year, then $8.90 next year. So good growth. But you're not looking at the common stock. You're looking at the preferred. So the first thing you always have to do is step back and say what am I buying? What sector am I buying? What asset allocation am I buying? And that is preferred stock. Which means that is more fixed income than equity. I know it's called preferred equity, but it's not. It's effectively fixed income because that's what you're getting. You are getting a fixed income off of it. You are not an owner of the company. You are a creditor, which means that you have duration risk, some type of duration risk.
Most likely, it's going to be long duration, meaning a lot of times these prefers don't ever expire. They don't ever mature.
You just get your dividend.
Now, it's higher than you're going to get from a bond, for example, or you're going to get from the common stock.
But you are taking more risk without getting the upside. In the common stock, they can raise that dividend. The preferred, you're just getting that dividend. And if they go bankrupt, well, you're not as protected as the bondholders because you're lower in the capital structure. You're in between common stock and senior bondholders. So you don't get the upside of common. You don't get protection on the downside as a senior bondholder. You're kind of in the middle, and that's why the yield looks high, and you have longer duration. The problem with this, and the probably why it's, I have to go look at the yield. What the yield is right now, I'm not sure exactly which preferred you're talking about. There are probably different issues here. Is that this is becoming an industry that is increasingly higher risk. So for example, if the industry more broadly builds at too much capacity for AI compute, right now that might not seem possible, but certainly can happen. There's a number out there that's too much. Maybe the technology shifts and this is no longer viable technology. Maybe AI moves on device, on your iPhone, your Android, etc. That'll probably happen as well. So the point here is that there's a lot of risk to the massive amount of CapEx that they're putting out there, and they do have a lot of debt. So my point here is that you are taking on a lot of credit risk. You're getting a nice yield, but you're not getting that upside, and you're taking on duration risk. So I just don't find this as attractive by.
Thanks for the call. Now, with a great show yesterday, we looked into the story, data centers, housing, and hidden real estate plays of the AI boom. Luke and I talked about that. We also touched on Medtronics, a name that we own for clients. If you happen to miss it, go check it out. The best way to get every show is to follow InvestTalk wherever you get your podcast. Now, we have a lot of ground to cover today. Over the next 45 minutes or so, our main focus point concerns this story, the SaaS-pocalypse debate, our AI stocks disrupting SaaS in 2026 Software stocks are swinging wildly among amidst growing debate over whether AI is cannibalizing traditional SaaS business models. A phenomenon some are calling the SaaS-bocalypse. So we explore these structural shifts and whether this sets up opportunity or more risk. Also, we're going to touch on European Stocks.