Investor confidence in cloud software is waning, with the median NTM revenue multiple dropping to 4.1x, the lowest in a decade. The FCF multiple stands at 18.9x, significantly down from the previous low of around 26x. Despite these declines, the growth-adjusted revenue multiple median is slightly higher than pre-COVID levels, indicating that while valuations are down, growth rates are also weak. The article attributes this shift to a loss of faith in the SaaS business model, which used to be seen as reliable for generating predictable cash flows. Two key assumptions behind evaluating SaaS businesses are now under scrutiny. First, high retention rates—the foundation for stable cash flows—are being questioned, especially as AI emerges and could lead customers to abandon legacy providers. Second, the idea of terminal value, or the long-term worth of a business, is also in doubt. The increased likelihood that some companies may have a terminal value of zero is causing valuations to plummet. The article argues that while many believe software will easily transition to new AI-powered platforms, the reality is more complex. The marginal cost of creating software has dropped, resulting in greater competition and a possibility of commoditization. Investors will likely regain confidence only after seeing sustained retention rates despite AI competition. So far, companies like ServiceNow have reported stable retention, but broader market sentiment remains cautious.