JPMorgan: Software Stocks Face Overreaction, Not Long-Term Threat; MSFT, CRWD Highlighted

JPMorgan economists note market concerns about AI disrupting the software sector are overstated, with software stocks having already sold off and presenting potential short-term rotation backflow. Led by Dubravko Lakos-Bujas, the team suggests investors increase exposure to high-quality software companies with strong AI resilience. The recent selloff was not sector-specific; SaaS stocks, whether already integrating AI or leveraging proprietary data and stacks, were all pressured. MSFT and CRWD are highlighted for AI-driven operational efficiency gains. High switching costs and multi-year contracts in enterprise software are expected to moderate near-term impacts. Looking ahead, the fourth-quarter earnings outlook remains positive, with analyst forecasts indicating 16.8% CAGR in software sector profits through 2026. This view aligns with Morgan Stanley's call for further upside in U.S. tech stocks, with software corrections offering attractive entry points.