AI Disruption Fears Hit US Software Stocks

AI disruption fears triggered a steep pullback in US software stocks, but Wall Street strategists say the selloff may have created a buying opportunity. 

Markets were rattled after Anthropic launched plug-ins for its Claude Cowork agent, reigniting concerns that fast-moving AI systems could disrupt traditional software companies. The S&P 500 software and services index fell as much as 17% over six sessions before recovering about 7%. 

JPMorgan strategists, led by Dubravko Lakos-Bujas, said markets are pricing in worst-case AI disruption scenarios that are unlikely to materialize in the next three to six months. They described the downturn as an overly bearish reaction, arguing that solid fundamentals and positioning resets skew risks toward a rebound, particularly in higher-quality software stocks. 

The bank recommends adding exposure to AI-resilient companies such as Microsoft, Palo Alto Networks, ServiceNow, CrowdStrike, and Datadog—many of which were among the hardest hit during the selloff. 

Morgan Stanley shares a similar view. Katy Huberty, the firm’s global director of research, said the valuation dislocation appears sentiment-driven rather than fundamental. She highlighted strong revenue expectations, improving earnings revisions, and potential benefits from a weaker US dollar as supportive factors for the sector. 

Retail investors also stepped in, buying software and technology stocks despite AI disruption concerns. 

Key takeaways: 

• The S&P 500 software index dropped 17% before rebounding 7% 

• JPMorgan sees rebound potential in high-quality software stocks 

• Morgan Stanley views the selloff as sentiment-driven 

• Retail investors increased exposure during the dip 

Strategists caution that volatility may persist, but they view the recent correction as a selective entry point for long-term investors focused on fundamentally strong software companies. 

 

Source: 

https://www.reuters.com/business/ai-disruption-fears-create-buying-chance-us-software-stocks-strategists-say-2026-02-10/