MS Sees Software Stocks Recovering Post-AI Fears in 2026

Key Analyst Outlook

Morgan Stanley projects a sentiment recovery for application software stocks in 2026. The forecast follows an anticipated period of underperformance in 2025 driven by concerns over artificial intelligence.

Current Market Climate

The software sector currently faces pressure from investor fears that generative AI could compress growth and erode the competitive moats of established companies. This uncertainty has weighed on valuations throughout the industry.

Impact on the Software Sector

The investment bank's analysis suggests that as the market gains more clarity on the actual impact of AI, initial fears will likely subside. This shift could pave the way for renewed investor confidence and a positive re-evaluation of software stocks.

Concluding Outlook

Market watchers will monitor how software firms adapt to and leverage AI technology through 2025. Demonstrating resilient business models will be crucial for capitalizing on the expected sentiment improvement in 2026.

FAQ

Q: Why are software stocks expected to underperform in 2025?
A: Due to market fears that generative AI will negatively impact their growth and competitive advantages.

Q: Which firm provided this forecast?
A: The analysis was provided by investment bank Morgan Stanley.

Source: Investing.com