π Software sector under heavy pressure
Sector Technology β Software is currently taking a solid hit and most well-known names have dropped by tens of percent:
π And it's not just these big players β for example Duolingo ($DUOL) is about -45% year-to-date and is at the lowest levels since 2023.
π What's behind this?
- higher interest rates β pressure on growth stock valuations
- slowing growth at some companies
- but mainly FEAR OF AI π€
π The market is afraid that:
- AI could make software cheaper and reduce pricing power
- companies will lose part of their competitive edge
- some products will be partially or completely replaced
π Result? Investors are now often "selling everything," because it's unclear who will be the winners and who will be the losers.
π What is important to realize:
Most of these companies still have:
- strong cash flow π°
- high margins π
- dominant market positions π
Just look at $ADBE β where revenues are clearly rising! Still, the company is down by about 30% year-to-date.
π Question for investors: Is this the start of a bigger problem, or a typical correction that has historically created the best buying opportunities?
π¬ Personally, I see these situations as moments when some quality companies reach more attractive valuations. Even so, I consider AI a huge risk for these companies and I tend to avoid most of them. For me, for example, DUOLINGO is misunderstood, as is UBER.
π Do you follow any of these companies? If so, which one and most importantly why that one? π
$CRM $UBER $INTU $FICO $PAYX $NOW $ADP
I opened a position in $CRM. I believe some companies donβt need to be afraid and will show their dominance and strong numbers in the upcoming results, which will reassure investors that those drops were unwarranted. Iβve also been eyeing shares of $FICO for a while.
After that sharp decline I bought $CRM. The stock drop was overdone and the upside potential is even greater now.
I already own several shares of $UBER and I'll probably keep buying. Uber is growing incredibly fast, and I think it's already much better than Tesla.