The software sell-off of early 2026 did not happen because earnings suddenly fell apart.
It happened because investors started to wonder whether AI could make big chunks of traditional SaaS less valuable, or even obsolete.
The rout wiped out $830 billion in market value across software and services stocks in just six trading days after Anthropic’s new Claude plug-ins intensified those fears.
That is the backdrop for Morgan Stanley’s contrarian call.
Keith Weiss is arguing that two of the market’s most beaten-up names, Intuit and Salesforce, have been sold too hard.
What broke the market’s trust in SaaS
The panic was unusually fast because the fear was existential.
Anthropic’s tools were aimed at automating tasks across legal, sales, marketing and data analysis, which hit directly at the subscription model many software companies rely on.
Investors did not just worry about slower growth; they worried that AI agents could do work that customers once paid software vendors to organize, route and track.
Morgan Stanley’s software team said “peak uncertainty has severely impacted Software multiples,” and the sector had already fallen roughly 33% from October 2025 levels.
In that same call, Weiss said investors were underestimating the ability of incumbent software vendors to participate in the AI cycle, not just get run over by it.
That is the core of the bullish case.
Why numbers tell a different story
The irony is that the two stocks Morgan Stanley likes most are not weak businesses at all.
Intuit just reported fiscal second-quarter revenue of $4.7 billion, up 17% year over year, while non-GAAP diluted EPS rose 25% to $4.15.
Global Business Solutions revenue grew 18%, Consumer revenue rose 15%, and TurboTax still grew 12% despite a noisy tax season.
That is why Weiss made Intuit his top pick and kept a $580 price target, which implies about 58% upside from the stock’s level at the time of the note.
Morgan Stanley said the stock’s valuation near 20 times GAAP earnings looked attractive and that the April-quarter print should provide “added clarity on the durability of TurboTax growth” and open the door to upward estimate revisions.
Salesforce tells a similar story, only with a more direct AI angle.
Morgan Stanley included Salesforce among the software names it viewed as most attractive after the February selloff.
The bank argued that the bear case gives too little credit to incumbent vendors that can still win in the AI era.
Salesforce’s own numbers help that argument, as in its fiscal 2026 results, Agentforce and Data 360 annual recurring revenue exceeded $2.9 billion, up more than 200% year over year.
Should investors follow Morgan Stanley’s lead?
That depends on whether the market has priced in extinction when the reality may be adaptation.
The bearish case is not silly, as the investors see AI as a real threat to software pricing power, and that the February rout was driven by exactly that concern.
But Morgan Stanley’s view is that the market has gone too far in assuming disruption means collapse.
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