(Getty Images)

Claude Cowork the newest fuel for an AI-driven de-rating of software stocks

Software stocks are in the wilderness: fears of disintermediation by AI mean it’s difficult to think of them as growth stocks going forward, but they’re not necessarily cheap enough to be considered value stocks, either.

Luke Kawa

1/15/26 8:08AM

Software companies started off 2026 with a record underperformance of chip stocks.

Things haven’t gotten any better since.

The iShares Expanded Tech Software ETF is off more than 4% year to date, with most of the stocks in the fund showing a discouraging trend: just 31% are trading above their 200-day moving average.

The launch of Claude Cowork by Anthropic, which was mostly built using its Claude Code tool, has reignited traders’ desire to get out of software stocks for fear that they’ll be disintermediated by AI tools and agents.

A smattering of formerly high-flying, highly valued software companies have suffered significant valuation compression to converge around enterprise value-to-estimated sales ratios of less than 5.

(Many thanks to modestproposal1, a member of my finance twitter Mount Rushmore, for bringing this to our attention.)

To modify “Anna Karenina,” each member of this software family is unhappy in a similar way, despite being very different when it comes to top-line growth, margins, market caps, or the customer needs their businesses address. Nevertheless, they’ve all arrived at essentially the same valuation destination by way of a unifying cause.

A growth stock that’s sold off is not a value stock. It’s a stock left to wander the wilderness.

The business prospects of established software firms have taken a hit because of the ease with which AI agents are able to develop software and handle the tasks and processes that served as the core value proposition provided by these companies. Or more simply: if the marginal corporate dollar goes directly to AI, rather than software or labor, it makes sense that investment dollars would follow, too.

“First, the arrival of truly capable AI agents is no longer a 2027 or 2028 story, it’s happening now. The timeline has collapsed. Second, the classic ‘build versus buy’ calculation that has governed enterprise software decisions for decades has been fundamentally altered,” Jordi Visser of 22V Research wrote in a note from January 7. “When a domain expert can build sophisticated technical systems in hours rather than months, the economics of custom development versus off-the-shelf solutions shift dramatically.”

For investors who primarily hold broad market ETFs, this state of affairs is more than a bit annoying: many of the seemingly disrupted are multibillion-dollar market caps in popular benchmark indexes, while the disruptor, in the case of Anthropic, isn’t publicly traded.

Typically, software firms trade at higher valuations than chip companies because they’re asset-light, historically higher-margin, and tend to generate high amounts of reliably recurring revenues, whereas semiconductor companies are subject to the whims of volatile manufacturing cycles. But the sell-off and concurrent de-rating of software stocks leaves the parent index for the iShares Expanded Tech Software ETF near a similar valuation as the Philadelphia Semiconductor Index. That’s a signal about the perceived strength of this trend: investors are increasingly willing to pay up for the products that lay the foundation for the potential disintermediation of software companies, rather than these sticky revenue generators.

(Note: This software fund also counts both AI software beneficiaries like Palantir, D-Wave Quantum, and some crypto treasury companies as some of its most richly valued members, most of which I would struggle to call software stocks.)

While valuations for many software companies are cheap relative to their history, they still trade at a significant premium to the S&P 500 on most valuation metrics (including EV to sales). Therein lies the rub: a growth stock that’s sold off is not a value stock. It’s a stock left to wander the wilderness.

“For those trying to buy software because they are cheap and fade semiconductors, I think people are missing what these engineers have said this year,” Visser added. “The competitive moats around enterprise software businesses begin to look dangerously shallow in this world.”

The bull case for software? Well, for starters: this bear case, and the fact that everyone’s seemingly betting on these negative trends to persist. Positioning data from Morgan Stanley suggests that institutions hate software stocks at the moment.

Even if AI eats software, it’ll have a lot of chewing and digesting to do along the way, since software’s already eaten the world first.

President Trump Delivers An Announcement From The Oval Office

Pharma largely unfazed as Greenland tariffs roil markets

Drugmakers, which have spent the past six months reaching tariff deals with Trump, seem to expect some immunity from a new batch of tariffs on European countries.

J. Edward Moreno1h

Luke Kawa3h

POET Technologies nears multiyear high on strong call demand after flagship product wins award

POET Technologies is surging on heavy volumes and high call demand after announcing that it won a Product Innovation Award at China’s Infostone awards.

The honor went to the optical communications company’s flagship product, the Teralight, which uses light to move data between chips.

“Unveiled less than a year ago at the 2025 OFC Conference, POET Teralight has driven commercial interest in the Company because of its highly integrated design and complete optical system-on-chip architecture that simplifies module development,” per the press release.

This award may be the latest excuse to buy the stock, which is up over 40% year to date.

Call activity is elevated, with nearly 37,000 having changed hands as of 10:55 a.m. ET, well above the 20-day average of 28,030 for a full session. Shares are approaching their multi-year high of $9.41.

Matt Phillips3h

Intel bucks market slump after Wall Street upgrades

While the market slid early Tuesday, Intel soared as the American chipmaker received a pair of upgrades:

HSBC analysts lifted their rating on the stock to “hold” — essentially “neutral” — from “reduce,” Wall Street-speak for “sell.” The analysts nearly doubled their price target for the shares to $50 from $26. (That’s essentially where the stock is currently trading.)
Seaport Global also boosted its rating to “buy” from “neutral,” with a $65 price target.

Improving demand for CPUs — Intel’s bread-and-butter processors — is behind HSBC’s newfound enthusiasm for the shares. Analysts at the bank wrote:

“We had been cautious on Intel mainly given overall uncertainty on customer pipeline and execution headwinds in their foundry business while the core business was also lacking visibility on growth drivers. However, we now turn more positive as we expect the traditional servers (DCAI) to get back on a growth trajectory. We expect there is an overwhelmingly increasing demand for server CPUs driven by rising agentic AI... While the stock has moved up 19% YTD (vs S&P 500 up 1%), we believe there is further [data center and AI group] upside still not fully priced in. Hence, we upgrade Intel from Reduce to Hold.”

HSBC seems to be slightly understating the extent of the gains for the stock so far in 2026, as its share price has risen nearly 30% since the end of last year. But the gains are even more impressive if you date them to the partial nationalization of the ailing American chip giant, which was announced on August 22. Almost a month later, Nvidia announced a strategic partnership with the company, giving it a massive shot in the arm. Since then the stock is up more than 90%.

Luke Kawa4h

ImmunityBio surge continues on sign its drug may be approved to treat a broader range of bladder cancers

Once you start squeezing, you can’t put the toothpaste back in the tube.

Shares of ImmnuityBio are flying higher once again, up more than 30% in early trading Tuesday after having been down as much as 10% in the premarket. A little more than half an hour into the regular trading day, more than 46 million shares have changed hands, more than 3x the 20-day average for this point in the session.

Last week, we discussed how a number of positive press releases from the company touting the progress of its treatments helped send shares skyward, making the heavily shorted company a hot topic of discussion on the r/ShortSqueeze subreddit.

The positive press parade continues this morning, with ImmunityBio announcing that the FDA asked for more information about the ability of its ANKTIVA drug to treat a certain type of bladder cancer, though it doesn’t need to do any new clinical trials. Management said they would provide this information within 30 days.

Share are up nearly 200% over the past six sessions.

On Monday, the company published a podcast appearance by Dr. Patrick Soon-Shiong, founder, executive chairman, and global chief medical and technology officer, on “The Sean Spicer Show,” which was provocatively titled, “Is the FDA BLOCKING Life Saving Cancer Treatments?”

Luke Kawa5h

AppLovin craters after report from CapitalWatch alleges it’s a money-laundering operation for “transnational criminal kingpins”

AppLovin is tumbling in premarket trading on Tuesday after financial research agency CapitalWatch published a report on Monday calling the company “the ultimate monument to 21st-century new-type transnational financial crime.”

“AppLovin serves as the ultimate exit for asset laundering/diversion by transnational criminal kingpins,” the authors wrote, alleging that the growth of its advertising business comes in part from illicit cryptocurrency funds routed through its platform.

AppLovin did not immediately respond to a request for comment from Sherwood News.

This is far from the first report to question AppLovin’s business practices.

Fuzzy Panda Research and Culper Research announced short positions in the ad tech firm last February in research reports alleging that AppLovin’s operating performance was a function of “systematic exploitation of app permissions” as well as taking data and gaming the ad platforms of other tech giants, particularly Meta. In October, reports surfaced that the SEC was investigating AppLovin’s data collection practices, as were a number of state regulators.

The allegations raised by CapitalWatch are a whole different kettle of illegal fish.

Anything is possible. But if I were hypothetically trying to launder a bunch of money, I likely would not try to do so through a publicly traded entity domiciled in the United States that’s subject to much more regulatory oversight and scrutiny than the average global firm.