Introduces topic: S&P software down 11% in four days, WisdomTree cloud ETF down >10%. Presents paradox: market fears AI is a bubble AND that AI eats software revenue - both can't be true.
Speaker1
John Belton
Acknowledges market irony: fears about AI bubble vs. AI clearly generating returns in digital advertising, digital commerce, cloud computing, and agentic software. Argues AI can't be both a bubble AND eating software industries.
Notes market has had it both ways - tech stocks were extremely extended.
Speaker1
John Belton
Case-by-case analysis: some stocks got overextended and have been correcting. We've been in months of market rotation out of winners into laggards.
Asks how to distinguish overvalued stocks from those with reasonable PEs that will grow into valuations.
Speaker4
John Belton
Many software companies were overvalued 6-18 months ago relative to decelerating fundamentals and rising disruption risk. Large tech platforms benefiting from AI with less disruption risk trade at reasonable multiples today, though valuations can always derate further.
Asks if rebound will be discriminate case-by-case or broad-based.
Speaker1
John Belton
Will be case-by-case as different businesses face different disruption levels and stocks are dislocated vs. fundamentals differently. Recent selling has been indiscriminate. Could take time to digest, but interesting opportunities will emerge on other side to pick quality AI-beneficiary names.
John Belton
Cites Google and Amazon as examples - market sold off strong earnings with aggressive capex outlooks. Amazon trades at >20 PE discount to Walmart, extending upside case when fundamentals improve.
Questions if Google/Amazon sell-off represents day of reckoning.
Speaker1
John Belton
Concern about software companies is valid. Claude Code commoditizes software writing. Software is at a moment where they must figure out how to coexist with AI, improve products, and pivot business models to survive - existential risk for the space.