Software stocks have had a difficult time recently given the AI boom. According to Apollo analyst Sambur, the bottom is still far away.
• Software stocks with steep losses since the beginning of the year
• AI threatens user-based software
• Apollo expert doesn’t see any bottom yet
Given the ongoing AI boom, software stocks in particular have been hit hard in recent weeks. It is the fear of a structural crisis that is circulating in the industry. The area of Software-as-a-Service (SaaS) is particularly affected, in which context the “SaaSpocalypse” is sometimes referred to. The point is that there is a fear that artificial intelligence could make the business model around user-based software licenses obsolete, as they will carry out existing software tasks themselves in the future.
This has caused US software stocks such as Salesforce, ServiceNow and DocuSign or SAP on the German side to collapse sharply since the beginning of the year, to name just a few examples.
No ground in sight
David Sambur from Apollo Global Management recently commented on the negative development of software stocks on CNBC’s “Money Movers”. He didn’t have any good news with him, but stated: “Unfortunately, I think it’s still very early,” said the expert.
According to him, software titles would be scrutinized in terms of their income model, gross margin profile and valuation. In addition, there would be the changing competitive landscape with a view to growing competition from Anthropic and OpenAI.
“I know the markets are up and have recovered somewhat, but I don’t see any change on these four points as there is still a big question mark about the impact of AI in reducing the costs of competition and thereby increasing competition,” he said.
Investment opportunities through volatility
Nevertheless, Sambur also pointed out that volatile times often offer the best investment opportunities. For example, in the wake of the Corona pandemic, Apollo invested in the hotel and travel industry when it came under great pressure – an investment that would have subsequently paid off.
In his opinion, the downturn in software stocks could also experience such a rebound, although in his opinion it will still be a while before things start to recover on a sustained basis.
Software stocks still important
The downturn in software stocks is not a “referendum on the quality of software or the importance of software in the modern economy.” When investing in software companies, it is not necessarily the past or the near future that is important, even if there has been a rebound or the most recent quarterly figures have been good. What is important, however, is what happens in one, three or five years. And no one would have an answer to that question. It is this uncertainty that is now leading to a revaluation of software stocks as investors now price in more room for a safety net.
In addition, there is a lot of capital in the software market. This would be an advantage if things were going up, “but very hard on the way down,” explains the Apollo expert.
Martina Köhler, editorial team at finanzen.net
By the way: Apollo Global Management and other US stocks can even be traded on finanzen.net ZERO until 11 p.m. (without order fees, plus spreads). Open a depot now for free and secure a new customer bonus!
Selected leverage products on Apollo Global Management
With knock-outs, speculative investors can participate disproportionately in price movements. Simply select the lever you want and we will show you suitable open-end products on Apollo Global Management
The leverage must be between 2 and 20
Advertising
