J.P Morgan: The sell-off of software stocks appears to be a valuation reset rather than an industry crisis.

Fabio Bassi, head of cross-asset strategies at J.P. Morgan, stated that the poor performance of software stocks so far this year does not indicate a fundamental breakdown in the reasons and basis for investing in this sector. Earlier this year, investors began selling off software stocks amid concerns that AI-driven intelligent agents would disrupt traditional business models of software companies. However, Bassi stated that artificial intelligence is actually helping rather than hindering the software industry. "We are seeing increasing evidence that AI is enhancing workflows, not eating into them." Bassi said that after the sell-off, traders shifted their investments from software to hardware that powers artificial intelligence, such as semiconductor stocks. The strategist stated that if investors seek to withdraw large amounts from the hardware sector, the popularity of this trade will increase the risks associated with it.