AI doomsday report creates opportunities in software stocks; A look at Salesforce's and Joby Aviation's latest earnings; 'What's Hot in the Treatment of Obesity'
1) Software stocks, as measured by the iShares Expanded Tech-Software Sector Fund (IGV), tumbled nearly 5% on Monday...
This was due to a joint research report from technology entrepreneur/investor Alap Shah and Citrini Research that went viral: The 2028 Global Intelligence Crisis.
It outlines a doomsday scenario of the U.S. economy destroyed by AI. Framing itself as a "macro memo from June 2028," it describes a world in which the S&P 500 Index has plummeted 38%, unemployment has spiked to 10.2%, and we're trapped in a deflationary spiral caused by the mass displacement of white-collar workers.
In my opinion, this is total nonsense...
I'm a big believer that AI will change the world – especially since Google Gemini may have helped save my dad's life last month. But I've also studied enough history to know that it takes many years, even decades, for businesses to adopt and incorporate new technologies.
Think of tractors and other farming equipment that released the majority of the population from working on farms... or electricity, the telephone, or the Internet. Yes, some jobs were lost from these advancements. But our dynamic, growing economy replaces them.
The sell-off caused by the viral report is creating opportunities among beaten-down software stocks, as my friend and New York University marketing professor Scott Galloway argued in Tuesday's Pivot podcast (starting at 44:54)...
He thinks it's unlikely that corporate customers will rip out their embedded, industry-standard software from companies like Figma (FIG), Adobe (ADBE), and Salesforce (CRM) to replace them with AI.
Reader Karl S. agrees, using tax-software maker Intuit (INTU) as an example:
I'm a software developer with more than 20 years of experience. The last few weeks, I've been hearing "software is dead." But is it?
Let's take Intuit's QuickBooks. Could you use AI to write a QuickBooks application? Maybe, but why would you? I can get QuickBooks for a reasonable price.
I use AI to write code. It's very helpful. It writes better code than I do. My guess is it improves my productivity by 30%.
But AI development is still in its infancy and not as great as most people think. Plus, you have to tell it exactly what you want, which takes time and thinking. Writing a QuickBooks application may take a lot longer than you think. You still need to know what you're doing to have AI write your code.
In addition, there's all sorts of product knowledge that Intuit has that you might not be aware of. So an individual or a company may not be able to reproduce its product as easy as one might think.
Thanks for the insight, Karl – I agree.
Intuit's TurboTax and QuickBooks products have been tax-filing staples for decades. Yet the stock is down more than 50% since last July due to the AI scare.
My Stansberry's Investment Advisory team and I are scouring the sector to find the best beaten-down, high-quality software stocks to recommend to subscribers. (If you're not already an Investment Advisory subscriber, you can become one by clicking here.)
2) One of the software stocks we're analyzing is Salesforce. The stock jumped 4% yesterday after reporting solid fourth-quarter earnings after market close on Wednesday.
Revenues were up 12%, in line with expectations. And earnings per share ("EPS") were $3.81, crushing estimates of $3.04.
The company guided to revenue of between $45.8 billion and $46.2 billion this year, in line with consensus estimates of $46 billion. And it announced a $50 billion share-buyback program, equal to 27% of its current $185 billion market cap.
With the stock at around $192 this morning and EPS estimates at $13.22 for this year, the stock has a price-to-earnings (P/E) multiple of only 14.5 times.
That's a fraction of its average forward P/E multiple of 66 times since the beginning of 2008 and at a nearly 20-year low, as you can see in this chart:
3) My favorite speculative stock for quite some time, Joby Aviation (JOBY), also reported fourth-quarter earnings after the close on Wednesday. And the stock jumped 4.2% yesterday.
This is a pre-revenue company (hence my warning that the stock is speculative – so size appropriately). That means traditional financial metrics are hard to apply.
But the company has plenty of cash thanks to a recent $1.2 billion capital raise and is making excellent progress on all fronts. Here are some highlights from its shareholder letter:
- Record 18 point increase in FAA [Federal Aviation Administration] progress on fourth stage of certification
- First FAA-conforming aircraft for [Type Inspection Authorization] set to fly shortly
- First passengers expected in 2026
- Plans to double production capacity in 2027
- Turbine electric demonstrator aircraft completes first flight
I continue to like this stock, for the many reasons I've outlined in dozens of e-mails over the past few years.
4) In Wednesday's e-mail, I mentioned how I think Eli Lilly's (LLY) new weight-loss drug, retatrutide, is going to be a blockbuster.
I also quoted Dr. Kevin Maki, an esteemed researcher in this field, on Wednesday. And he just sent me this 16-slide presentation: What's Hot in the Treatment of Obesity.
In slides 13 and 14, he shows the astonishing weight loss that patients experienced in clinical trials using retatrutide – an average of 28.7% of their body weight for those on the full dosage:
Analysts expect the drug to be approved and on the market in roughly a year. I think it has the potential to dethrone all other GLP-1 weight-loss drugs.
Best regards,
Whitney
P.S. I welcome your feedback – send me an e-mail by clicking here.
P.P.S. This morning, I hiked and ran what I'm calling the "Tilson Trifecta" here in Cape Town, South Africa. It consists of three peaks overlooking the city: Devil's Peak, Table Mountain, and Lion's Head.
Over nearly six hours of sustained effort, I ran 9.5 miles with 5,180 feet of vertical (nearly a mile). Then I went in a friend's pool and cold bath. The views were spectacular, but I'm gassed! Here are some pictures:
