AI disruption fears create buying chance in US software stocks, strategists say

By Saqib Iqbal Ahmed

NEW YORK, Feb 10 (Reuters) - The severity of the pullback successful bundle stocks successful caller days, driven by fears ​of advances successful artificial quality disrupting the industry, has created opportunities for ‌investors to presumption for a rebound successful higher-quality stocks, strategists astatine JP Morgan said.

"The marketplace is ‌pricing successful worst-case AI disruption scenarios that are improbable to materialize implicit the adjacent 3 to six months," JPMorgan strategists, led by Dubravko Lakos-Bujas, said successful a enactment connected Tuesday.

"Given the positioning flush, overly bearish outlook connected AI disruption of ⁠software and coagulated fundamentals, we ‌believe the equilibrium of risks is progressively skewed towards a rebound, particularly successful higher prime bundle segments," the strategists wrote.

Global ‍markets were rattled past week aft AI developer Anthropic's motorboat of plug-ins for its Claude Cowork cause reignited fears that rapidly progressing AI systems could encroach connected the halfway ​businesses of accepted bundle companies, starring to the S&P 500 bundle and services ‌index falling arsenic overmuch arsenic 17% successful six sessions done Thursday. The scale has rebounded astir 7% since Thursday.

While not ruling retired further weakness successful bundle stocks, the strategists recommended "investors adhd vulnerability to a handbasket of higher prime and AI-resilient bundle companies."

The handbasket includes Microsoft, Palo Alto Networks, ServiceNow, CrowdStrike Holdings and ⁠Datadog, immoderate of the worst-hit stocks successful ​the caller selloff.

Separately, strategists astatine Morgan Stanley besides ​said they spot charismatic opportunities successful the space, citing respective drivers including beardown gross expectations, improved net revisions and the payment mega-cap ‍tech companies tin ⁠reap from a weaker dollar.

"We judge the dislocation successful U.S. Software valuations is sentiment-driven, not fundamental," Katy Huberty, Morgan Stanley planetary manager of research, ⁠said successful a note.

Meanwhile, retail investors snapped up bundle and tech stocks pursuing past week's ‌heavy selloff, mostly brushing speech the worries.

(Reporting by Saqib Iqbal Ahmed; ‌editing by Megan Davies and Chris Reese)