AI trading became overcrowded, and many are now fearful about the prospects of stocks that had gone so far and are now facing uncertainty in a rapidly changing environment. This was confirmed by Charles Schwab Corporation last week when they published their Q1 2026 Trader Sentiment Survey. According to the survey results, only 52% of traders were bullish on AI stocks compared to 64% in the previous quarter.
This shift in retail sentiment is creating a debate about whether AI stocks are risky right now. Contrarian investors believe the divestment presents an opportunity, and no one has been given a pat on the back other than Morgan Stanley. Financial services company analysts believe that high-quality, high-growth companies should be bought at an attractive price. The intensity of AI adoption currently dominates the fear of disruption in relation to business operations. Morgan Stanley analysts believe that investors should use the selloff to take positions in software stocks that will find a way to deal with the disruptions that may be created by new AI models.
Microsoft (MSFT) is a software company best known for its Windows operating system and business software. The company also offers laptops and cloud services, among other things. It is led by Satya Nadella and its headquarters are in Washington State.
MSFT stock has given back all of its gains from the past 12 months since the launch of Anthropic’s Claude Opus 4.6 AI model. This is still a better performance than the iShares Expanded Tech-Software Sector ETF (IGV), which not only gave back all of its gains but is now down nearly 12% over the same period.
As a result of the selloff in the software stock, Microsoft now trades at a forward P/E of 23.49x. This is 25% below the five-year average P/E multiple and just above the S&P 500’s ($SPX) forward P/E multiple of 21.92x. The same picture is presented for all multiple measurement iterations. In addition, even the dividend yield of 0.86% is now above its five-year average, which is attractive considering the stock is up 75% over the past five years.
Before the selloff began in early February, Microsoft had already announced an earnings report, registering a 17% year-over-year (YoY) growth in revenue. Revenue from Microsoft Cloud touched $50 billion for the first time, up 26% YoY. This segment is likely to remain strong even if the software industry is severely disrupted. AI performing software tasks will still require computing power and access to the cloud, which Microsoft provides. So it’s a stock to buy on the dip.
Analysts remain bullish on the stock despite fears of a disruption, with 41 of 50 Wall Street analysts rating it a “Strong Buy.” The bullish price target of $595.6 offers a 45% upside from here, while the bullish analyst price target of $678 offers more than a 65% upside.
Atlassian (TEAM) offers productivity and collaboration tools, including Jira, Jira Service Management, Confluence, and Loom. The company is based in San Francisco, California, and has been operating since 2002.
TEAM stock has dropped a staggering 71% in the past 12 months. It has lost a quarter of its value in the past one month, despite the iShares Expanded Tech-Software Sector ETF trading over the same period. This shows how poor the experience is with collaboration tools, but arguably that’s what makes it such an exciting opportunity.
TEAM is currently as cheap as a stock can get. It trades at a staggering 82% discount to its five-year forward price-to-earnings ratio. The same discount is available on the ratio of price to book and sale price. In terms of multiples, the stock is cheap.
The question for investors is whether the future holds more promise than the market expects. The company is expected to grow its revenue by 15.74% in 2027, 18.55% in 2028, and 15% in 2029. These would be good numbers if growth is confirmed. However, amidst the fear of disruption, one needs to take a closer look at how managers deal with this.
In the Feb. earnings call. 5, management reiterated that there is no change in revenue growth outlook for FY 2027. FY 2026 guidance was not unusual, but management’s cautious approach was expected given industry trends. In short, there weren’t any red flags on the earnings call, and buying the stock now while keeping a close eye on the next earnings report might be the right way to go with this stock.
Analysts have a “Neutral Buy” consensus on TEAM stock. After the Q2 2026 earnings report, Citi lowered its price target to $160 from $210 previously. This is very close to the target price of $163.32, according to the estimates of 28 different analysts. Despite the downgrade, Citi’s price target still sees the stock doubling from here on out.
Intuit (INTU) is a software company that specializes in serving the financial industry through its cloud-based platform. The company provides tax preparation and filing, business solutions, accounting tools, invoicing, and payments, among other things. Its headquarters are located in Mountain View, California.
INTU stock has outperformed the other two software stocks, down only 29% over the past 12 months. It recovered all losses after the launch of Claude Opus 4.6. However, it should be added that much of that gain came after an impressive Q2 earnings report on Feb. 26.
The earnings report that drove the stock higher shows that the company has done a good job of convincing investors that it won’t be easily distracted. It also means that previous valuation discounts are no longer available, although the stock still trades 50% below its five-year average on various metrics such as forward P/E and price-to-cash flow ratio.
The company also confirmed guidance on the earnings call, expecting total revenue in the range of $20.997 billion and $21.186 billion in fiscal 2026. This translates to a growth rate of 12% to 13%. This may not sound like much, but the highlight of the call was CEO Goodarzi’s mention of a multi-year deal with Anthropic to grow the company’s proprietary data. The CEO called it a game-changer, and it would be one if the company could pull it off. This suggests that if a disruption occurs, Intuit may be able to benefit from the resulting disruptive change.
Analysts have shown caution in the past few days, lowering their price targets on the stock. So far this week, Mizuho has cut its price target from $675 to $600, Goldman Sachs from $720 to $519, and Citi from $803 to $649. Only time will tell if the analysts were right, but regardless, the price target of $629.48, according to the 32 analysts covering INTU stock, still offers a 43% upside from here on out.
As of the date of publication, Jabran Kundi had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is for informational purposes only. This article was originally published on Barchart.com
