The software correction has been relentless. Charts continue trending lower, and investor confidence has started to crack. Asked whether this is a falling knife or a rare buying window, Rob Spivey and Professor Joel Litman of Altimetry Research framed the moment not as a collapse, but as a separation.
Litman drew an immediate parallel to last year’s semiconductor scare following China’s DeepSeek headlines. At the time, fear dominated the narrative. Today, semiconductor leaders sit at new highs.
“This is very similar,” Litman explained. “We are in that kind of an AI productivity boom… it is still a bull market.”
The key difference now? Investors must distinguish between software companies positioned to benefit from AI and those vulnerable to disruption.
The Market Is Pricing Panic—Not Fundamentals
Spivey outlined how Altimetry approached the sell-off: evaluating 126 software companies using Uniform Accounting and ranking them on AI durability, switching costs, system-of-record status, and integration strength.
The result, according to Spivey, is a stark divide.
“It's really a separating the wheat from the chaff,” Litman noted.
While some SaaS firms face legitimate risk, others are being repriced as if their businesses are collapsing—despite strong fundamentals and durable competitive moats.
Litman emphasized that historical corrections within bull markets often recover quickly. “You’re talking quarters, not years, for this kind of recovery,” he said.
With that backdrop, Spivey highlighted three software names he believes investors should be leaning into—not away from.
Microsoft: At the Center of AI, Not at Risk From It
First up: Microsoft (NASDAQ: MSFT).
Spivey was unequivocal. Microsoft isn’t threatened by AI—it is powering it. Between Azure infrastructure, enterprise integration, authentication layers, and ecosystem depth, switching costs are extraordinarily high.
Despite that dominance, Microsoft shares have fallen roughly 20% in recent months. Under Uniform Accounting, Spivey argues the valuation disconnect is glaring.
“This is only a 20 times uniform P/E company right now,” Spivey said. (P/E is short for price-to-earnings ratio.)
Even more compelling, Altimetry’s analysis suggests the market is pricing Microsoft for just 6% annual earnings growth, while the firm believes 14% growth is achievable. With Azure demand constrained not by weakness but by data center capacity, Spivey suggested sentiment—not fundamentals—is weighing on the stock.
AppLovin: Narrative Fear vs. Marketplace Reality
The second name: AppLovin (NASDAQ: APP), the mobile app advertising marketplace.
Recent fears around “vibe-coded” AI ad platforms sparked sharp selling, pushing shares down more than 30%. But Spivey argues those fears ignore the company’s real moat—data.
AppLovin operates the marketplace used by major tech platforms to place ads in mobile apps. Its proprietary dataset, combined with integrated AI optimization, creates a feedback loop difficult to replicate. According to Spivey, the market is paying roughly 22 times earnings for a business expected to grow earnings north of 60% annually over the next few years. Yet current pricing implies just 20% growth.
For Spivey, this disconnect reflects narrative panic, not competitive deterioration.
Intuit: Security, Ecosystem, and Switching Costs
The third opportunity: Intuit (NASDAQ: INTU).
Shares have fallen roughly 40% amid fears that AI tools could replace TurboTax and QuickBooks. Spivey pushed back on that premise, arguing security, integrations, and ecosystem depth provide durable protection. Are consumers truly going to upload sensitive tax documents and financial histories to experimental AI tools? Spivey is skeptical. Beyond security, Intuit’s ecosystem—from payments to budgeting tools—creates meaningful friction for users considering switching.
Uniform Accounting also tells a different profitability story. While GAAP numbers show modest returns, Altimetry’s adjustments reveal a business generating returns roughly five times corporate averages.
At approximately 16 times Uniform earnings and priced for minimal growth, Spivey sees asymmetric upside potential.
The Software Names to Avoid
If some stocks are mispriced to the upside, others remain vulnerable—even after large declines.
Litman highlighted HubSpot (NYSE: HUBS) and DocuSign (NASDAQ: DOCU) as two examples.
Both have fallen 35% to 40%. Yet even after Uniform adjustments, Litman says they trade at elevated multiples—roughly 65 to 70 times earnings.
HubSpot’s risk lies in customer profile. Serving primarily small and mid-sized businesses, its clients can switch platforms far more easily than large enterprises with embedded systems of record.
“Without the switching costs, what’s the reason that they can’t continue to lose against the AI tools that are coming online?” Litman asked.
DocuSign faces a different issue: product concentration. E-signature technology, while useful, lacks proprietary data advantages or meaningful barriers to replication by larger platforms.
In Litman’s framework, high multiples combined with limited moats and rising AI competition create unfavorable risk-reward setups.
Separation, Not Collapse
The broader takeaway from Spivey and Litman is not that software is broken—it’s that investors must be selective.
The AI productivity cycle remains intact. Uniform Accounting suggests several leaders are being mispriced as casualties rather than beneficiaries. At the same time, not every beaten-down SaaS name deserves a rebound.
For investors navigating the volatility, the message is clear: distinguish between companies at the center of AI infrastructure and those exposed to commoditization.
Corrections can feel indiscriminate in the moment. But as this conversation made clear, the recovery—when it comes—may reward those who focused on fundamentals rather than fear.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
The article "AI Is Separating Software Winners From Losers, 2 Experts Explain" first appeared on MarketBeat.
