In a note shared Thursday, veteran investor Ed Yardeni said investors have moved from "AI-phoria to AI-phobia," hammering Software, Brokers, Insurers and Asset Managers in just weeks.
Instead of bidding up anything with an AI angle, markets are now punishing companies seen as vulnerable to it.
1. Software: Disruption Or Discount?
Software stocks have taken the hardest hit.
The iShares Tech-Expanded Software Sector ETF (NYSE:IGV) is down nearly 20% year-to-date, making it the worst-performing industry group.
The catalyst? Fears that AI-native tools, like Anthropic's Claude, could disintermediate traditional enterprise software providers in areas like legal services, finance and sales.
Data providers were not spared.
Thomson Reuters Corp. (NASDAQ:TRI) shares have fallen 31.1% year to date and 57.6% from their high last summer. RELX plc (NYSE:RELX), the parent of LexisNexis, is down 30% this year and 47.4% from their May peak.
FactSet Research Systems Inc. (NYSE:FDX) has slid 30% year to date and 57.3% from its Dec. 2, 2024 high. S&P Global Inc. (NYSE:SPGI) is off 25% in 2026 and 30% from last August's peak.
Investors quickly extrapolated: if generative AI can perform specialized workflows, do companies still need high-priced application software?
“For those who lived through the advent of the Internet, this feels like déjà vu all over again,” Yardeni said.
Forward price-to-earnings ratios have compressed sharply.
Application Software now trades at 23.7 times forward earnings, down from 35.3 at its recent high. Systems Software trades at 23.3, down ...
