AI disruption: does the software selloff create contrarian buying opportunities?

Software stocks are selling off fast, as investors fear that their business models face an existential threat.

For years, artificial intelligence (AI) stocks have delivered impressive gains for equity investors, but the technology is now spooking the markets.

Recent weeks have seen several releases from AI frontier model developers like Anthropic that potentially enable entire applications for functions like legal analysis to be built fast and with minimal human input.

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Apps like these were previously the domain of the wildly profitable software-as-a-service (SaaS) market. But investors are now concerned whether models like these can survive if businesses can simply throw a few prompts into Claude (Anthropic’s chatbot) and build their own alternative at minimal cost.

The selloff has been substantial. The Nasdaq 100, which is dominated by technology stocks, fell 3% between the start of the year and 23 February, during which time the S&P 500 has traded flat. SaaS stock Shopify (NASDAQ:SHOP) fell 27% during that period, in something of an AI-driven apocalypse for software stocks.

“The market environment today is presenting a wave of dislocation as AI developments ripple through industries,” said Alex Wright, portfolio manager of Fidelity Special Values Trust (LON:FSV).

But Wright adds that this widespread pessimism creates opportunities, especially for contrarian investors.

Some sectors and stock classes appear relatively insulated. US small caps are outperforming their larger counterparts this year, and there are reasons to believe that the macroeconomic setup in the US is favourable for them going forward.

Which other sectors and stocks could survive AI disruption? And has the selloff created buying opportunities for some oversold stocks?

The importance of value

Wright’s view is that the disruption being caused by AI fears makes this the most opportunistic time in the markets since the Covid-19 pandemic.

At that time, “many high-quality companies traded at deeply depressed valuations even as fundamentals began to stabilise”, he says.

Wright believes that, like the Covid disruption, the uncertainty around the winners and losers that AI will produce tilts the markets in favour of value investors.

Part of the reason that SaaS stocks have been so hard-hit by the AI disruption is that their hefty profit margins convinced investors, over the course of the last decade or so, that they could keep increasing their profits almost indefinitely.

That led to their fundamental valuations, such as price to earnings (P/E) ratios, becoming elevated. When that happens, any developments that challenge the perpetual growth thesis can lead to fairly rapid share price declines.

“Companies trading on rich multiples leave little margin for error,” said Wright. “When investors assume a company’s monopoly advantage will endure, even a modest shift in competitive dynamics, including the risk of AI-driven disruption, can justify a meaningful de-rating.”

It is notable that despite the recent selloff, many SaaS stocks are still quite expensive. Shopify still has a trailing P/E ratio above 80, making its stock far more expensive than Nvidia shares by that metric. ServiceNow’s (NYSE:NOW) trailing P/E is over 100.

The market clearly doesn’t believe (yet) that these SaaS stocks are going to disappear in the immediate future – merely that their margins may come under more pressure in the coming years than they have so far.

Over the longer term, the impact of AI on these stocks is harder to predict. But as Wright points out, the advantage of buying value stocks is that you don’t need to think that far ahead.

“The low valuation multiples we pay for stocks means we do not need to take a decisive view on the outlook beyond the next ten years,” he said.

Could Salesforce become an AI winner?

One of the SaaS stocks that best epitomises the AI disruption selloff is Salesforce (NYSE:CRM). Salesforce shares fell 32.7% in 2026 to 23 February and 42.1% over the preceding 12 months.

Markets fear that its CRM software is precisely the kind of product that AI tools could displace as the technology advances (it has also historically been viewed as one of the quintessential SaaS stocks, making it particularly susceptible to the latest round of pessimism).

But Dan Ives, head of global technology research at investment bank Wedbush Securities, believes that the Salesforce selloff is overblown.

Ahead of the company’s earnings release on 25 February – which is expected to see chair, CEO and co-founder Marc Benioff address the threat that many believe AI poses to Salesforce – Ives pointed out that its “potential to monetise its vast installed base of over 150,000 customers… is high.”

These customers, which include 90% of the Fortune 500, “have spent decades codifying their business logic and organising their data within the Salesforce ecosystem”, Ives added. This creates unique data and context that, Ives believes, generic AI models can’t replicate.

“We believe that [Salesforce] is still a long-term winner of the AI revolution despite the company finding itself in the epicentre of the software sell-off, as we think the market is overlooking key details about Salesforce's differentiated position against the negative AI Ghost trade overhang,” said Ives.

Benioff pivoted Salesforce towards becoming an AI business as early as 2014, and that it has integrated AI throughout elements of its offering, such as its Agentforce agentic AI product.

Contrarian stocks to beat the AI selloff

Picking SaaS winners is not for the faint-hearted in the current climate, especially given the fact that they still trade on high multiples (though Salesforce looks more reasonable than Shopify or ServiceNow at just 35 times trailing earnings).

Wright highlights some other sectors that have been hit by the AI disruption selloff, perhaps unfairly, and which now look very reasonably priced.

One sector he likes is staffing companies like Page Group (LON:PAGE), Hays (LON:HAS) and Sthree (LON:STEM).

“Investors have viewed staffers as vulnerable to disintermediation long before the emergence of AI,” said Wright. “More recently, concerns about automation and job displacement have intensified those fears. However, we have yet to see clear evidence that AI has structurally impaired these businesses.”

Similarly, wealth managers have been caught in a selloff that Wright views as “increasingly irrational”. The sector has “long endured disintermediation fears from robo-advice and lower-cost alternatives without having meaningful effects”, he points out. St James Place (LON:STJ) is an example pick, which currently trades below 14 times trailing earnings.