AI pricing needs to come down to increase adoption, says Jefferies' Brent Thill

Core Viewpoint - Microsoft has clarified that recent reports inaccurately suggested a reduction in AI sales targets, emphasizing that sales quotas for AI remain unchanged [1] Group 1: AI Demand and Market Dynamics - There is a strong indication that AI demand is accelerating, as evidenced by positive trends in companies like Snowflake and Salesforce [2][3] - The AI sector is experiencing significant growth, with many companies unable to keep up with demand, reflected in a 50% increase in RPO backlog [4] - The software industry may need to adjust pricing models to enhance adoption of AI products, which are still in their infancy [5][7] Group 2: Pricing and Adoption Challenges - High initial pricing for AI products has been a barrier to adoption, with companies like Salesforce and Atlassian facing challenges due to their pricing strategies [6][9] - The expectation is that as AI agents become more prevalent, there will be a need for lower pricing to drive adoption, although this may impact margins [9][10] - The market is still in the early stages of AI development, and while commoditization is anticipated, it is not yet a concern [11][12] Group 3: Future Outlook and Valuation - The outlook for enterprise AI is optimistic, with projections suggesting significant revenue growth in 2026 and 2027 [14][15] - Current software valuations may be undervalued, especially if AI adoption accelerates, with potential for multiples to increase [14][16] - The semiconductor sector is currently outperforming software, indicating a shift in market sentiment, but there is belief that software companies will see a recovery [16]