Wall Street prefers infra over apps

Wall Street analysts are shifting away from many software stocks and toward the cloud and computing systems that power artificial intelligence. (bloomberg.com) Citigroup downgraded six application-software names to Neutral on April 11: Similarweb, Docusign, Autodesk, Nice, CCC Intelligent Solutions, and Veeva Systems. Reports on the note said Citi still viewed the companies as solid businesses, but saw limited upside over the next 12 months as artificial-intelligence pressure builds. (seekingalpha.com) (computing.net) Piper Sandler has been making the opposite call inside tech, favoring spending tied to artificial-intelligence infrastructure and warning that the broader application category faces higher risk. In an earlier note on chief information officer budgets, Piper said artificial-intelligence infrastructure was a bullish area while application software looked more exposed. (investing.com) (pipersandler.com) The split comes from how investors think artificial-intelligence agents work. Instead of buying separate software for each office task, companies can now use models that search, write, browse, run code, and complete multi-step jobs inside one managed system. (anthropic.com) (openai.com) Anthropic launched Claude Managed Agents on April 8, saying the product is meant for “long-horizon” work and lets customers run cloud-hosted agents at scale. Anthropic’s documentation says the service can read files, run commands, browse the web, and execute code inside a managed environment. (claude.com) (platform.claude.com) OpenAI has been pitching the same layer of the market. Its agent platform says companies can build, deploy, and manage production agents, and its business materials describe agents as tools that coordinate tasks, connect to systems, and adapt in real time. (openai.com 1) (openai.com 2) That has fed a selloff that started months ago. Bloomberg reported on February 4 that a Goldman Sachs basket of software stocks had dropped about 15% in seven trading days and sat roughly 25% below its September peak; another Bloomberg report said the Standard and Poor’s 500 software group had fallen more than 25% from its October high. (bloomberg.com 1) (bloomberg.com 2) The pressure has kept resurfacing with each new product launch. Bloomberg reported on March 24 that software shares fell again after a report that Amazon Web Services was developing an agent for sales and business-development work, and on April 9 said the group was still slumping on disruption fears. (bloomberg.com 1) (bloomberg.com 2) Not everyone on Wall Street thinks the damage will hit every company the same way. Standard and Poor’s Global Ratings said on March 12 that artificial intelligence is unlikely to cause a sector-wide wave of credit downgrades, because the effects will vary company by company. (bloomberg.com) For now, the market is rewarding the picks-and-shovels side of artificial intelligence more than the software built on top of it. The next test is earnings season, when companies will have to show whether agents are taking demand away or simply changing where the money goes. (bloomberg.com) (bloomberg.com)