Our U.S. Software Analyst Sanjit Singh explains how AI is
reshaping software development and why the future for the sector
may be brighter – and busier – than ever.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Sanjit Singh, the U.S.
Software Analyst at Morgan Stanley.
Today: how AI is transforming software and what that means for
developers.
It’s Friday, October 24th, at 10am in New York.
There's been a lot of news stories and anecdotal accounts about
AI taking over jobs, especially in the software industry. You may
have heard of vibe coding, where people can use natural language
prompts, guiding AI to build software applications. So yes, AI is
creating a world where software writes itself. But at the same
time, the demand for human creativity only grows.
The introduction of AI coding assistants has dramatically
expanded what software can do, fueling a surge in both the volume
of code and the complexity of projects. But instead of shrinking
the developer workforce, AI is actually supporting continued
growth in developer headcount, even as productivity soars.
We’re estimating the software development market will grow at a
20 percent compound annual growth rate, reaching $61 billion by
2029. And that’s up from $24 billion in 2024. And in terms of the
developer population, [research] firms like IDC expect it to jump
from 30 million paid developers in 2024 to 50 million by 2029 –
that’s a 10 percent annual growth rate. Even the most
conservative estimates, like those from the U.S. Bureau of Labor
Statistics, see developer jobs growing roughly 2 percent per year
through 2033, outpacing overall employment growth.
So, what does this mean for people behind the code?
AI isn’t replacing developers. It’s redefining them. Routine
tasks are increasingly handled by AI agents, and this frees up
developers to become curators, reviewers, architects, and most
important problem-solvers.
The upshot? Companies may need fewer developers for repetitive
work, but the overall demand for skilled engineers remains
robust. As AI lowers the barrier to entry, the pool of people who
can build software applications expands dramatically. But at the
same time, the complexity and ambitions of projects rise, keeping
experienced developers in high demand.
No doubt, AI coding tools are delivering real productivity gains.
Some teams are reporting nearly doubling their code capacity and
cutting pull request times in half after adopting AI assistants.
Test coverage has increased sharply, resulting in 20 percent
fewer production incidents for some organizations. But there is a
catch with all this AI-generated code. It’s creating significant
new bottlenecks downstream.
An example of this is code review, which is becoming a major pain
point. Many organizations are experiencing pull request fatigue,
with developers rubber-stamping changes just to keep up. Some
teams now require three reviewers for AI-generated change,
compared to just one before. And in terms of automated testing,
systems are getting overwhelmed because every change made with AI
sets off a complete round of test.
Now we estimate productivity gains from AI in software
engineering at about 15–20 percent. But in complex projects, the
gains are much lower, as the volume of new code often means more
bugs and more rework – and hence more human developers.
So where do we go from here?
In our view, the future isn’t about fully autonomous software
development. Instead, large enterprises are likely to favor an
integrated approach, where AI agents and human developers work
side by side. AI will automate more of the software development
lifecycle. And that not only includes coding – which, coding
typically accounts for 10-20 percent of the software development
effort – but other areas like testing, security, and deployment.
But humans will remain in the loop for oversight, design, and
decision-making. And as software gets cheaper and faster to
build, organizations won’t just do the same work with fewer
people – they likely will do more.
In short, the need for skilled developers isn’t going away. But
it’s definitely evolving. And in the age of AI, it’s not about
man versus machine. It’s about man with machine. And so with more
software, we see more developers.
Thanks for listening. If you enjoy the show, please leave us a
review wherever you listen and share Thoughts on the Market with
a friend or colleague today.
Kommentare (0)
Melde dich an, um einen Kommentar zu schreiben.