AI Is Hungry for Software
The bar has been raised for 'winning'... Software ate the world... AI is hungry for software... The machines are coming for the lawyers... Five 'final-phase' AI stocks...
AI continues to breed new winners and losers...
We've been following AI's rapid growth over the past few years... and how it's influencing the economy and markets – for better or worse.
Chip stocks like Nvidia (NVDA) have had a remarkable run since ChatGPT's release in 2022 showed what AI was capable of – sooner than many folks thought.
ChatGPT creator OpenAI has also enjoyed tremendous buzz and an eye-watering and curious valuation – as we discussed yesterday. It reportedly has plans to go public by the end of this year. Anthropic, creator of the rival Claude AI platform, could have an initial public offering ("IPO"), too.
However, we've also warned readers to be careful about putting their full faith in the promises of AI. If the high expectations aren't met, or are even simply not perceived to be possible anymore, the consequences can be swift.
Today, chipmaker Advanced Micro Devices (AMD) saw its shares plunge nearly 17%, even after reporting fourth-quarter results yesterday that beat Wall Street expectations. Why? Because Wall Street analysts evidently wanted more. Here's CNBC today...
AMD said it expects $9.8 billion in revenue, plus or minus $300 million, during the first quarter. Expectations were for $9.38 billion.
Some analysts anticipated a far stronger outlook from the company, fueled by heightened AI spending and massive data center buildouts.
AMD also had a high bar to clear this quarter following a wave of megadeals in the fourth quarter, including partnerships with OpenAI and Oracle...
Clearly, the bar for "winning" in the AI boom has been raised.
Today, the tech sector of the S&P 500 Index meaningfully fell for a second straight day, losing around 3% and dragging down three of the four major indexes. Only the Dow Jones Industrial Average was in positive territory.
At the same time, the tech 'food chain' is changing...
Fifteen years ago, venture capitalist Marc Andreessen wrote a phrase that became famous in tech circles: "Software is eating the world."
The software industry blossomed to new levels, thanks to cloud technology that allowed users to access software – not from floppy disks or CDs like when I (Corey McLaughlin) was a kid – but over the Internet and via subscriptions all over the world.
Software as a Service ("SaaS") companies thrived in various industries and created tremendous value for shareholders and folks who went into coding for a profession to create specialized, easily accessible software.
Now, though, the software industry is in danger of being swallowed by another emerging technology: AI.
Coders were some of the first to lose their jobs because of the technology. Now, the products and businesses themselves are changing.
Our Select Value Opportunities editor, Mike Barrett, wrote this morning about one of the most recent major developments in the space. As Mike explained...
OpenAI competitor Anthropic released Claude Opus 4.5 – its most advanced generative artificial-intelligence ("AI") model – on November 24, 2025. And it's taking the technology to a whole new level.
As Boris Cherny, head of Claude Code, recently told the Wall Street Journal, "It's just so different than the AI that came before."
Opus 4.5 enables countless users, regardless of their coding experience, to quickly build complex, functional software. One person has used it to retrieve wedding photos from a corrupted hard drive. Shopify CEO Tobias Lütke even used it to analyze his MRI.
Banking giant JPMorgan Chase (JPM) has also entered the mix... Its asset-management unit manages more than $7 trillion in client funds. And it has to vote on corporate decisions for thousands of companies annually.
Traditionally, the bank has relied on third-party proxy advisory firms, like Glass Lewis and Institutional Shareholder Services, to accomplish this administrative feat. But now, JPMorgan Chase is set to begin using an internal AI-powered platform to manage all of its voting. If successful (which we expect it will be), other banks will surely follow.
There are endless examples...
If software ate the world, AI could now be eating software...
On Friday, Anthropic debuted a new legal-focused feature that "automates contract review, [non-disclosure agreement] triage, compliance workflows, legal briefings, and templated responses – all configurable to your organization's playbook and risk tolerances. Built for commercial counsel, product counsel, privacy/compliance, and litigation support teams."
The market reaction was swift. Software stocks and legal-related consultancies have taken a beating over the past few trading days. For example, LegalZoom (LZ) – the online legal services provider – saw its shares fall 20% yesterday.
The S&P 500 software and services sector is down almost 15% over the past week, and down roughly 25% from a previous high in October, as investors question the old ways of the software world. As Mike wrote in today's Select Value Opportunities update...
You see, for decades, legions of companies have created specialized software to help customers manage specific tasks. This includes things like administering payroll and creating digital content, including original art.
These companies are now at risk of becoming obsolete due to AI platforms like Opus 4.5. After all, these platforms help regular folks build their own software programs... So they don't have to pay someone else to do it for them.
Mike referred to what we're seeing right now as a "SaaSpocalypse"...
In a nutshell, many investors are impulsively dumping their software stocks.
Given this sentiment, it's not surprising that four of the top six most undervalued stocks in the Select Value Opportunities database right now are software companies – Adobe [(ADBE)], Tyler Technologies (TYL), Roper Technologies (ROP), and Broadridge Financial Solutions (BR). They've declined an average of 22% year to date, dramatically underperforming the S&P 500 Index.
The thing about impulse selling action like this, though, is that it can often be a signal of misguided emotions. Yes, it's true that AI could be eating software as we know it, possibly replacing some software businesses. But other companies will adapt, as Mike wrote...
No one knows how the battle between AI and specialized software companies, like those mentioned above, will ultimately play out. We expect that some will successfully exploit AI and thrive, while others will wither and disappear.
While nobody can guarantee the future winners and losers in AI, our team has thoughts on who they could be, and we know from watching the markets over time that it's quite possible to pick up shares of high-quality companies in sell-offs like these.
Mike already has exposure to AI via four stocks in the Select Value Opportunities portfolio... and I wouldn't be surprised if he adds more as what he calls the "most disruptive innovation of our lifetime" plays out.
If you're looking for more ways to profit...
As we wrote yesterday, it looks like the AI boom might be getting long in the tooth. Cracks have emerged as investors look for returns on investments and spending promises.
We're seeing the hallmarks of "late stage" boom activity.
In a convoluted way, the overblown reaction to a single new AI legal feature is also a signal of too much excitement and promise in the sector.
However, as Stansberry's Investment Advisory lead editor Whitney Tilson says, "that doesn't mean you've missed out on all the gains." As he wrote in a new special report for Investment Advisory subscribers, published yesterday...
The biggest moves in bubbles often happen in the run's final phase – where there's a blow-off top before the crash.
I believe we are in that phase now and we're getting very close to the top. But remember, most bubbles don't suddenly burst.
It reminds me of early 2008, when I believed we were near the top of a massive bubble in the housing market. The market had peaked the previous October, but had declined only slightly as the worst companies in the sector blew up.
Whitney doesn't think the AI bubble will burst suddenly, and remains "cautiously optimistic on the AI market." There are stocks to be cautious about (like perhaps some software businesses that don't adapt to AI) and those to be optimistic about.
In his new report "Five Final-Phase Stocks," Whitney recommends five specific stocks that are set up to benefit as the AI boom plays out.
The list includes some leading developers of AI technology, but most are companies that will benefit in less obvious ways as the world's AI demand continues to soar. Existing subscribers and Stansberry Alliance members have access to the full report here.
And if you're interested in learning more, click here to see how to get started with a subscription to our flagship advisory click here to see how to get started with a subscription to our flagship advisory today.
New 52-week highs (as of 2/3/26): ABB (ABBNY), Atmus Filtration Technologies (ATMU), BHP (BHP), Alpha Architect 1-3 Month Box Fund (BOXX), BP (BP), Brady (BRC), British American Tobacco (BTI), Century Aluminum (CENX), Ciena (CIEN), CME Group (CME), Cisco Systems (CSCO), Chevron (CVX), Donaldson (DCI), DXP Enterprises (DXPE), EnerSys (ENS), Enterprise Products Partners (EPD), iShares MSCI Italy Fund (EWI), Comfort Systems USA (FIX), Franklin FTSE Japan Fund (FLJP), Cambria Foreign Shareholder Yield Fund (FYLD), GE Vernova (GEV), Gilead Sciences (GILD), W.W. Grainger (GWW), Hawaiian Electric Industries (HE), Helmerich & Payne (HP), Hershey (HSY), Hubbell (HUBB), Coca-Cola (KO), Lincoln Electric (LECO), Lumentum (LITE), Merck (MRK), Nucor (NUE), Ormat Technologies (ORA), PepsiCo (PEP), Invesco Oil & Gas Services Fund (PXJ), RenaissanceRe (RNR), Invesco S&P 500 Equal Weight Consumer Staples Fund (RSPS), SandRidge Energy (SD), Snap-on (SNA), Solstice Advanced Materials (SOLS), Tenaris (TS), Vale (VALE), Telefônica Brasil (VIV), Valero Energy (VLO), State Street Energy Select Sector SPDR Fund (XLE), State Street Industrial Select Sector SPDR Fund (XLI), State Street Consumer Staples Select Sector SPDR Fund (XLP), and ExxonMobil (XOM).
In today's mailbag, feedback from a Stansberry Alliance member who was happy to take profits in silver... Do you have a comment or question? As always, e-mail us at feedback@stansberryresearch.com.
"I know it's not a good idea to have a lot of capital in a single segment, but over the last year I wound up with a lot of my portfolio in precious metals and miners. On the 21st I noticed something strange, a sudden jump in silver prices. I kept watching and things accelerated. From reading all of the information you provided, I knew what was going on. I liquidated all my precious metal stocks on the 27th. Maybe I sold too soon, because they kept going up the next day. Did I miss out? Nope, the next day everything went down the tubes and I pocketed enough to pay our medical bills for the last year. My wife now knows the value of being an Alliance member." – Stansberry Alliance member Earl H.
All the best,
Corey McLaughlin with Nick Koziol
Baltimore, Maryland
February 4, 2026