LIVE MARKETS-Are AI-disruption concerns premature?

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ARE AI-DISRUPTION CONCERNS PREMATURE?

As investor worries about artificial intelligence-driven disruptions, particularly in the software industry segment, have taken center stage and weighed on stocks in recent weeks, Michael Wilson, chief U.S. equity strategist at Morgan Stanley, is wondering whether the fears may be premature.

Investor concerns around the pace of AI capex and labor force reduction have remained, he and other Morgan Stanley strategists write in a note this week.

"The tendency to jump a number of steps ahead from an AI disruption-related risk standpoint is having a disproportionate impact on long duration and/or service areas like software where out-year revenues/cash flows are more in question," Wilson says.

He notes that "software has also been faced with an overhang of capital deployed in the private markets over the last decade, which may also be weighing on the group."

But, he says, skepticism is typical of a major investment cycle, with investors questioning the pace of capital spending and which areas of the market could be disrupted.

Morgan Stanley thinks investment opportunities exist in software, business services and real estate. Its strategists see "attractive entry points" in such companies as Microsoft MSFT.O, Intuit INTU.O, Salesforce CRM.N, ServiceNow NOW.N and Atlassian TEAM.O, among others.

Separately, Goldman Sachs strategists write in a note that companies at the center of AI-disruption concerns "have generally reported solid" earnings along with upbeat near-term revisions.

Shares of Cadence Design Systems CDNS.O are up 9.5% on Wednesday after the company late Tuesday beat quarterly revenue estimates amid strong demand for complex AI processors that helped sales of its chip design software.

The S&P 500 software and services index .SPLRCIS is up more than 1% on Wednesday but down about 19% for the year to date compared with a roughly 0.7% gain in the S&P 500 .SPX since the end of 2025.

(Caroline Valetkevitch)

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