Morgan Stanley: 5 Top Software Stocks Could Double This Year

Morgan Stanley analysts argue that while software stocks have sharply declined amid fears of AI disrupting the industry, the timing now favors entry. The iShares Expanded Technology Software ETF (IGV-US) has fallen over 20% this year, dragged by Intuit (INTU-US), ServiceNow (NOW-US), and Salesforce (CRM-US), as AI startups intensify competition and reduce labor demand, pressuring pricing and revenue growth. A recent spike following Anthropic’s AI legal tools fueled the “SaaSpocalypse” sell-off. The firm’s latest report says the decline has been broad-based and lacks fundamental differentiation, creating an opportunity. If AI-driven volatility subsides and shares return to intrinsic value, Morgan Stanley estimates up to 5 large-cap software stocks could more than double in the next 12 months: Intuit and Salesforce have about 101% and 109% upside from Tuesday’s close, respectively. ServiceTitan (TTAN-US), CCC Intelligent Solutions (CCC-US), and Vertex (VRTX-US) also have significant upside. However, skepticism remains. Elon Musk of Tesla (TSLA-US) called the idea that AI would destroy software “illogical,” and Jefferies analysts note investor sentiment is “extreme.” Shareholders are demanding proof that AI deployments are materially improving financials; Microsoft (MSFT-US) and Amazon (AMZN-US) cloud growth underperformed, while Meta Platforms (META-US) saw a price rally after reporting improved ad effectiveness from AI tools. Until software companies demonstrate AI’s tangible impact, volatility is likely to persist.