Deutsche Bank said investors’ fears that AI would overwhelm software are not matched by reality.
Strategists at the bank issued a bullish call on software stocks on Wednesday, following weeks of concerns that AI could cause a shakeout in parts of the technology sector. They suggested that investors are undervaluing top software stocks.
“Software companies trade at a historically low premium to the market,” they write.
Despite suggestions that the sector’s valuation could be lower than the broader market, analysts said the reality was different. “The facts tell a different story,” the bank said.
European equity strategists Maximilian Urelle, Carolyn Raab and Francesca Mazzarri said concerns about AI have peaked.
The strategists upgraded their outlook for the sector, now calling it “overweight” on software stocks and neutral on tech stocks, up from their previous “underweight” rating on the sector.
Mention of AI disruption has decreased from the dramatic spike seen earlier this year. Deutsche Bank Research
of iShares Expansion Technology and Software Sector ETF has fallen 20% since the start of 2026, and the large tech sector has fallen nearly 4%.
Intuit, Salesforce, ServiceNow, and Adobe are some of the hardest hit stocks in this space. Some of these names have appeared on the stock pick lists of companies such as Jefferies, JPMorgan, Morningstar, and Wedbush.
Despite the significant decline in software stock valuations, Deutsche notes that it is not aware of a single software company that expects AI to have a negative impact on its earnings this year.
“This narrative focuses on the negative impact on software and ignores the positive effects of AI’s lower programming costs and potential product improvements,” the strategists said.
Deutsche reported that the sharp decline so far was related to a sharp decline in growth in one or two quarters. They warned that software revenue would be flat in 2022 and turned negative in 2008 and 2001.
The U.S. software company’s fourth-quarter 2025 profit rose 29% from a year earlier, the strategists said, adding that 2026 profit forecasts have been revised upward. Despite lingering concerns about AI, this is a bullish signal for what’s to come in the field.
