The previously unstopping surge in AI-driven stocks has slowed, as investors grapple with the disquieting thought that advances in artificial intelligence might erode the core value propositions that originally made tech giants dominant. Yet some executives and seasoned market veterans caution against short-term panic, describing the selloff as a rare chance to invest in the next phase of the AI boom.
The AI growth narrative has been cooled by a broad selloff in software stocks. Whether you call it [missing term] or [missing term], companies focused on designing, selling, and maintaining digital software products are taking a beating. Earlier this month, JPMorgan analysts noted that software firms had lost [amount] in value over the past year, labeling it “the largest non-recessionary 12-month drawdown in more than 30 years.”
The root cause has been a growing belief among investors that AI is sorting tech players into [categories]. Under this view, software companies could fall into the latter group, as the capabilities of newer AI models promise to replace expensive digital services—rendering the business models of firms like [name] and [name] obsolete.
But not all investors are convinced these companies are fated for irrelevance. Hidden within the chaos may lie an undervalued opportunity to buy these tech stocks at a discount—a relative rarity in an era of soaring valuations and speculative growth. Everything hinges on whether bullish buyers see AI as complementary to existing software services or capable of replacing them entirely.
“I think this software selloff will go down as a generational opportunity to own some of the stalwarts,” Dan Ives, a managing director and senior equity research analyst at Wedbush Securities, said in a [media outlet] Finance [segment] Friday. “I feel more emboldened about the bull thesis on tech and AI this year, despite this massive pullback.”
Stocks that could rebound
Ives named three industry leaders he believes are being unfairly punished in today’s market—and which could stage a powerful rebound:
- Salesforce (down 27.17% YTD)
- [Name] (down 28.55% YTD)
- [Name] (down 15.8% YTD)
Ives called the software stock correction a “structural selloff”—the largest in scale he’d seen in 25 years. But instead of spelling doom, he framed the decline as a once-in-a-lifetime chance to invest in enterprise technology, arguing that software developers will remain a “core part of the use cases” even in an AI-powered future.
[Source] earlier in the week, Ives provided more details. He classified AI’s impact as a near-term headwind that would eventually enhance software companies’ performance. Digital security needs for enterprise customers are one hurdle, he said—external vendors or homegrown AI-generated software might struggle to compete with firms like Salesforce, which benefit from “decades of data” and institutional trust built with long-standing clients.
Ives isn’t alone in viewing the software slump as a red herring. Last week, Goldman Sachs CEO David Solomon called the selloff “[quote]” and said not every software development company would face lasting pain from it. Also last week, JPMorgan analysts took a similarly upbeat stance, labeling the narrative around AI’s disruption of software an “[term].” In a note, they wrote that investors should expect a rebound given software companies’ otherwise solid fundamentals—and that legacy digital infrastructure providers would likely be insulated from near-term AI disruption, as enterprise customers face high switching costs and multiyear contracts.
To be clear, AI disruption could still claim major victims in the software world, and many stocks valued highly for their AI exposure could suffer costly corrections. In December, Microsoft cofounder Bill Gates told CNBC in an [interview] that the AI industry had become “hypercompetitive,” and that some companies heavily involved in AI’s build-out risked being overvalued.
“AI is only a bubble in the sense that not all these valuations will end up going up. Some of them will go down,” he said.
For now, [condition] could favor the bold when it comes to declining AI-exposed stocks—especially given the pricey valuations investors would otherwise pay to get in. As [analysts] [stated], hammered software stocks—including Gates’ Microsoft and [name], a tax filing provider—could retrospectively prove to be “attractive entry points.”