AI Fears Drive Short-Sale in Tech; JPM and MS recommend AI-Resilient Software Bets

U.S. software stocks are rallying positioning opportunities as AI disruption fears drive a recent pullback, according to JP Morgan. The firm said worst-case AI disruption scenarios are unlikely to materialize over the next 3-6 months, with risks increasingly skewed toward a rebound in higher-quality software segments. Last week, Anthropic’s Claude Cowork plug-ins reignited AI-related concerns, sending the S&P 500 software and services index down as much as 17% in six sessions through February 7. The index has since rebounded about 7%. JPMorgan recommends adding exposure to a basket of AI-resilient software companies including Microsoft (MSFT), Palo Alto Networks (PaloAlto Networks), ServiceNow (SNOW), CrowdStrike Holdings (CROWD), and Datadog (DGG). Morgan Stanley also highlights attractive opportunities citing strong revenue expectations, improved earnings revisions, and benefits from a weaker U.S. dollar for mega-cap techs.