Software Stocks Hit Hard by AI Concerns, Intuit and Others See Sharp Declines
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 18 2026
0mins
Should l Buy ADBE?
Source: seekingalpha
- Weak Software Performance: Renewed anxiety over AI disruption has led to a poor start for software stocks this year, with Morgan Stanley's SaaS index down about 15%, marking the worst opening since 2022 and reflecting growing investor caution regarding long-term growth expectations.
- Erosion of Traditional Software Value: Concerns that AI tools could undermine the value of traditional software products were reignited by a recent release from AI startup Anthropic, causing sharp declines in shares of Intuit, Adobe, and Salesforce, which further exacerbated market unease.
- Increasing Industry Divergence: While the Nasdaq 100 approaches record highs, many software stocks are languishing at multi-year lows, indicating that incumbents have yet to demonstrate meaningful revenue acceleration from their AI initiatives, leading to diminished confidence in future growth.
- Valuations at Historic Lows: Despite software stock valuations falling to historic lows, with Morgan Stanley's basket trading at roughly 18 times forward earnings, well below historical averages, investor confidence remains weighed down by uncertainty over how AI will reshape the software business model, leaving the sector still searching for a catalyst.
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Analyst Views on ADBE
Wall Street analysts forecast ADBE stock price to rise
26 Analyst Rating
13 Buy
11 Hold
2 Sell
Moderate Buy
Current: 238.980
Low
270.00
Averages
431.08
High
660.00
Current: 238.980
Low
270.00
Averages
431.08
High
660.00
About ADBE
Adobe Inc. is a global technology company. The Company's products, services and solutions are used around the world to imagine, create, manage, deliver, measure, optimize and engage with content across surfaces and fuel digital experiences. Its segments include Digital Media, Digital Experience, and Publishing and Advertising. The Digital Media segment is centered around Adobe Creative Cloud and Adobe Document Cloud, which include Adobe Express, Adobe Firefly, Photoshop and other products, offering a variety of tools for creative professionals, communicators and other consumers. The Digital Experience segment provides an integrated platform and set of products, services and solutions through Adobe Experience Cloud. The Publishing and Advertising segment contains legacy products and services. In addition, its Adobe GenStudio solution allows businesses to simplify their content supply chain process with generative artificial intelligence (AI) capabilities and intelligent automation.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- AI Tool Launch: At its summit, Adobe unveiled a suite of AI tools targeted at corporates to automate and personalize digital marketing functions, positioning itself against competitors like Anthropic and OpenAI, thereby reinforcing its market position in software development.
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See More
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- Share Buyback Program: Adobe announced a $25 billion share repurchase program aimed at enhancing shareholder value by systematically reducing the total outstanding shares, with implementation expected until April 30, 2030, thereby mitigating dilution from new stock issuance.
- AI Tool Launch: At its summit, Adobe unveiled a suite of AI tools targeted at corporates to automate and personalize digital marketing functions, positioning itself against competitors like Anthropic and OpenAI, thereby reinforcing its market position in software development.
- Analyst Ratings: According to Koyfin, 35 analysts rate Adobe's stock as 'buy' or higher, while only 4 rate it 'sell', indicating a positive market outlook, with an average 12-month price target of $329.28 per share, suggesting a potential upside of 33.2%.
- Investor Sentiment: Despite a 30% year-to-date decline in stock price, retail investors express confidence in the timing of the buyback program, reflecting market recognition of Adobe's ongoing investments and innovation capabilities in the AI sector.
See More
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- New Investment Positioning: Michael Burry has initiated a new position in Microsoft and other software stocks, believing these software and fintech payment companies are oversold despite broader market downside risks, indicating his confidence in these sectors.
- Increased Holdings: Burry has also increased his stakes in MSCI, PayPal, and Adobe, which have seen declines of approximately 25%, 37%, and 54% from their peaks, respectively, reflecting his optimism towards these depressed assets.
- Growing Market Concerns: Burry has expressed increasing unease about the broader market, noting that despite persistent geopolitical tensions, the market has experienced an unprecedented rally, suggesting a cautious outlook on future market trends.
- Put Options Strategy: He has raised the proportion of put options to 5% of his portfolio, indicating a more conservative investment strategy in light of potential market volatility under the current conditions.
See More
Amazon Partners with Meta for AI Chip Supply Deal
- Deal Details: Meta has entered into a deal with Amazon to utilize hundreds of thousands of Graviton AI chips for at least three years, demonstrating the company's commitment to investing in infrastructure to meet high computing demands.
- Market Demand and Layoffs: Despite announcing layoffs of around 8,000 employees, or 10% of its workforce, Meta's partnership with Amazon indicates ongoing investment in infrastructure to address the increasing user demand across its platforms.
- Technical Advantages: Graviton chips can handle a wide range of computing tasks, particularly suited for AI workloads, with Amazon claiming they offer the best performance-to-price ratio in its EC2 service while using 60% less energy, enhancing Meta's operational efficiency.
- Industry Trends: Meta's choice reflects a resurgence of CPU importance in the AI era, as demand for high-performance computing rises, with Graviton adoption positioning Meta as one of the top five customers, further solidifying its competitive stance in the AI sector.
See More
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- Massive Chip Acquisition: Meta has entered into a deal with Amazon Web Services to utilize hundreds of thousands of Graviton chips, with the agreement lasting at least three years, demonstrating Meta's commitment to investing in high computing demands.
- AI Infrastructure Investment: Following a combined $48 billion in AI infrastructure agreements with CoreWeave and Nebius, Meta is enhancing its computing capabilities to support its applications that serve 3.6 billion daily active users.
- Data Center Expansion: With the completion of a new data center in Oklahoma, Meta will operate 32 data centers to handle increasing user loads, even as it announces layoffs of around 8,000 employees, or 10% of its workforce.
- Strategic Technology Choice: By opting for Graviton chips over other CPUs, Meta emphasizes its focus on performance and efficiency for AI workloads, positioning itself as one of the top five Graviton customers, thereby strengthening its competitive edge in the AI sector.
See More
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- Market Reaction Analysis: Amid a sharp selloff in software stocks, Arora highlights infrastructure software and cybersecurity as bright spots, indicating potential growth opportunities in these sectors under AI influence, reflecting relatively strong market confidence in these companies.
- Industry Competitive Landscape: Palo Alto Networks leads in enterprise cybersecurity, facing competition from CrowdStrike, Zscaler, and SentinelOne; however, its deep knowledge of cybersecurity threats and client vulnerabilities helps maintain its competitive edge in the market.
- AI Impact Assessment: Arora argues that the market has yet to clearly differentiate software companies affected by AI, particularly noting that analytical and creative software firms face the most disruption, while infrastructure software and cybersecurity players may benefit, providing investors with a new perspective.
- Investor Sentiment Shift: Despite Palo Alto achieving 15% revenue growth last year, its stock has declined 6% year-to-date, reflecting a shift in retail investor sentiment and a decrease in market confidence regarding its future performance.
See More
Burry Increases Holdings in Microsoft and GameStop Stocks
- New Investment Moves: Notable investor Michael Burry disclosed a new position in Microsoft and increased his GameStop holdings for the second consecutive day, with a reported purchase of $6.4 million on Wednesday, indicating confidence in both companies' market potential.
- Tech Stock Declines: Major declines in ServiceNow and IBM following disappointing earnings have led to significant stock drops, with ServiceNow citing impacts from the Middle East conflict and issuing a lower full-year subscription gross margin outlook, while IBM's stock fell 8.3% due to unchanged revenue guidance, raising investor concerns about other tech firms.
- Options Trading Strategy: Burry purchased put options on QQQ, NVIDIA, and SOXX with strike prices of $550, $115, and $330 respectively, reflecting his bearish outlook on tech stocks, particularly after the AI-driven rally in semiconductor stocks.
- Market Dynamics Analysis: Despite the downturn in software and payment stocks, Burry remains optimistic about bombed-out stocks, suggesting that the AI-driven rally may cool off, especially after the semiconductor sector's historic surge, indicating potential market adjustments ahead.
See More
