JPMorgan Says Software Stocks Have Been "Prejudged" by the Market; Willingness to Enter Remains Low After This Sell-Off
The sell-off in sectors such as software, which are considered to be at risk due to the development of artificial intelligence, showed no signs of abating on Wednesday, with JPMorgan stating that pessimism is widespread among investors.
JPMorgan analyst Toby Ogg pointed out, "The environment we are in now is not just one where the industry is presumed guilty until proven innocent, but has even reached the point of being judged before trial."
Ogg has met with more than 50 investors in Europe and the United States over the past two weeks. He stated that over the past 12 to 18 months, they have significantly reduced their holdings in the software sector. In a report to clients, he wrote that even after the latest round of pullbacks, "overall willingness to enter the market remains low."
Ogg wrote that for software companies, "better-than-expected performance is no longer enough to convince the market." Unless they can "irrefutably prove that AI is a sustainable driver of growth rather than a long-term headwind."
He stated that this is a difficult hurdle for software companies to overcome because investors' concerns come from multiple angles. One of them is the pricing model, where software vendors charge per user. If AI tools reduce the number of logins customers need to complete tasks, this model could be undermined.
In addition, if software companies use their own AI tools to transform products, the original revenue model will also face transformation risks. Ogg said that any new product release from leading AI platforms in the future—for example, Anthropic's latest legal-related product—will further intensify investors' concerns about the sector.
On Wednesday, the software stock sell-off spread to Asia and continued in Europe. A basket of European company stocks considered at risk of AI disruption, compiled by UBS Group, fell another 2.1% after plunging 8% the previous day. Shares such as SAP SE and Sage Group Plc extended their declines.
Editor: Liu Mingliang
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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