The recent panic-driven sell-off in the software sector presents a buying opportunity in high-quality companies whose business models remain strong despite market fears. Consider buying established software leaders like Adobe (ADBE), Salesforce (CRM), and ServiceNow (NOW), which have been unfairly punished but possess strong competitive advantages and are integrating AI. Conversely, research firm Gartner (IT) is a stock to avoid, as its business model is seen as fundamentally threatened by generative AI. Separately, Disney (DIS) is presented as a compelling turnaround opportunity, trading at a 10-year low with significant potential upside if it sells its legacy TV assets. These opportunities stem from the market overreacting to the threat of AI disruption, creating value in resilient companies.

Software Sector (ETF: IGV)

• The software sector experienced a major sell-off, with the software ETF IGV down 20% in the past month. Software companies as a whole lost roughly 12% of their value in one week.
• The sell-off was triggered by fear that new AI tools from companies like Anthropic and OpenAI will allow companies to build their own software, making existing Software-as-a-Service (SaaS) companies obsolete.
• The podcast hosts argue this is panic selling and an overreaction, creating a significant buying opportunity for "dislocated high quality companies."
• The market reaction is compared to two historical examples:
  • Google (GOOGL): Its stock cratered 40% when ChatGPT was released due to fears that search was dead. Google then integrated AI, its search revenue increased, and the stock has risen 280% since its bottom.
  • Meta (META): Its stock fell 70% when TikTok emerged, with fears that Instagram was dead. Meta then launched Reels, which now has a similar user base to TikTok, and the stock has risen over 600% since its bottom.
• The core argument is that established software companies are not dead for several key reasons:
  • High Switching Costs: It is a "gigantic pain" for large enterprises to cancel contracts and switch providers like Salesforce. It takes time, money, and committee approval.
  • AI Integration: Existing software companies are already integrating AI into their products. For example, Salesforce is investing heavily in AI.
  • Trust and Relationships: Enterprises have long-standing relationships and trust in the security of their current providers, which a new startup cannot easily replicate.
• While the hosts believe the "software is dead" narrative is an overreaction, they do expect AI to create margin compression as new, cheaper AI-powered alternatives will give procurement departments more negotiating leverage.

Takeaways

• The recent, sharp sell-off in the software sector is viewed as a panic-driven overreaction rather than a fundamental collapse of the business model.
• This presents a potential buying opportunity in high-quality software companies that have been "unfairly punished."
• Investors should look for established software companies with strong enterprise relationships and high switching costs, as these "moats" will protect them from new AI competitors.
• While revenue may remain strong, investors should be aware of the risk of margin pressure in the long term due to increased competition.
• One way to invest in this theme is by buying the software ETF IGV, though the hosts suggest stock-picking may be better to separate the eventual winners from the losers.

Adobe (ADBE)

• The host disclosed that they bought Adobe stock during the recent sell-off.
• The stock is down nearly 40% in the past year and was trading at 17 times earnings, which is significantly below the S&P 500 average of 29 times and Adobe's own five-year average P/E of 37.
• The market is assuming AI will "kill Adobe overnight," but the host believes this is wrong.
• Bullish Case:
  • Adobe is a large enterprise company used by 98% of Fortune 500 companies, giving it a strong moat.
  • It has a major tailwind from the growth of short-form video, as Adobe Premiere is the industry standard for video editors.
  • The company is actively integrating AI into its product suite.

Takeaways

• Adobe is presented as a prime example of a "dislocated high quality" company, making it a potential buy at its current valuation.
• The market is seen as overly pessimistic about the threat of AI to Adobe's business, ignoring its entrenched position in the enterprise and creative professional markets.

Salesforce (CRM)

• The host also disclosed that they bought Salesforce stock.
• The stock is down 45% in the past year and was trading at 27 times earnings, compared to its five-year average of 73.
• Bullish Case:
  • Salesforce is a massive enterprise SaaS company with a huge moat due to extremely high switching costs. The host notes it would be very difficult to get an entire sales team to switch to a new platform.
  • Despite market fears, the company is still growing at double-digit rates.
  • Like Adobe, Salesforce is investing heavily to integrate AI into its platform.

Takeaways

• Salesforce is highlighted as another strong buying opportunity due to the market overreaction.
• Its powerful moat, built on high switching costs and deep enterprise integration, is expected to protect it from being easily displaced by new AI tools.

ServiceNow (NOW)

• This was the third stock the host bought during the software sell-off.
• It was trading at 9 times sales, well below its five-year average of 16.
• Bullish Case:
  • The market assumes AI has killed its business model, but ServiceNow is actively integrating AI.
  • The company has $1 billion in AI revenue in the pipeline for 2026.
  • It has signed contracts to integrate with both Anthropic and OpenAI.

Takeaways

• ServiceNow is considered another "massively oversold" stock and a potential buy.
• The company is not ignoring AI but is actively partnering with leading AI firms to enhance its offerings, which the market seems to be overlooking.

Microsoft (MSFT)

• The stock has also been "pummeled" in the software sell-off.
• The host considers it a good buy but did not purchase it because most people already have significant exposure to it.
• The bearish argument that OpenAI will kill Microsoft's business is seen as nonsensical because Microsoft owns a huge portion of OpenAI.

Takeaways

• Microsoft is viewed as a strong company that has been unfairly sold off.
• Its significant investment in OpenAI means it is well-positioned to benefit from the rise of AI, making the bearish thesis illogical. It remains a solid long-term holding.

Gartner (IT)

• The host expressed a very bearish view on Gartner, stating the company is "fucked" because of AI.
• The thesis is that AI can now generate research reports of a similar quality to what Gartner produces, undermining its core business.
• The stock is off 72% in the last year.
• The host predicts an activist investor may get involved to force the company to lay off a significant portion of its workforce and pivot to an AI-driven, lower-cost model.

Takeaways

• Gartner is presented as a potential loser in the AI revolution and a stock to avoid or potentially short.
• Unlike SaaS companies with high switching costs, Gartner's value proposition (research and reports) is seen as highly vulnerable to disruption from generative AI.

Disney (DIS)

• The host is bullish on Disney, calling it a "buy" and an "undervalued asset" at its current 10-year low.
• The primary issue holding the stock back is the "overhang" of its declining linear TV assets (ABC, ESPN, Nat Geo). In a conglomerate, the market often values the entire company based on its worst-performing division.
• The core businesses are seen as incredibly strong:
  • Parks and Experiences: An "unbelievable business with an incredible moat."
  • Film Studio: Creates valuable IP that feeds the parks.
  • Streaming: Gaining leverage and has a unique position in family content.
• The host believes that if the new CEO, Josh DeMauro, were to sell the linear assets—even for $1—the stock would go up substantially as the market would re-evaluate the company based on its stronger growth assets.

Takeaways

• Disney is a potential turnaround play. The investment thesis hinges on the new CEO successfully spinning off or selling the legacy linear TV networks.
• Investors buying now are betting that this "good bank, bad bank" separation will happen, unlocking the true value of the Parks, Studio, and Streaming divisions.
• Until the linear assets are shed, they will likely remain a drag on the stock's performance.

AI Investment Theme: Anthropic vs. OpenAI

• A major theme is the "AI wars," with a clear winner and loser being identified. This is a thematic insight as both companies are currently private.
• Anthropic (Bullish):
  • The company's Super Bowl ad is described as a "pivotal moment" and a "mega, mega viral" win, compared to Apple's famous 1984 ad.
  • Anthropic is successfully positioning itself as the ad-free, trustworthy alternative to OpenAI, a strategy that is seen as highly relevant and sustainable.
  • The host makes a bold prediction: "In 12 months, Anthropic is going to be worth more than OpenAI."
• OpenAI (Bearish):
  • The company is seen as making a "series of missteps."
  • The decision to introduce ads is viewed negatively, and CEO Sam Altman's defensive response to Anthropic's ad was called "some of the worst PR comms that we've ever seen."
  • The narrative around OpenAI is beginning to waver.

Takeaways

• The sentiment in the AI space is shifting. While OpenAI has dominated the consumer narrative, Anthropic is emerging as the new heavyweight champion, particularly by targeting the enterprise market and building a brand around trust.
• This suggests that the "winner-take-all" narrative in AI may be wrong, and new leaders can emerge. For investors, this means looking for opportunities in companies that are partnering with or enabling the "next wave" of AI leaders like Anthropic.