By Jack Hough
Two things to know about the selloff in software stocks. First, the easy wordplay is already taken. "SaaSpocalypse" is everywhere, suggesting a biblical reckoning for software-as-a-service companies. I thought about going with "Valentine's Day SaaSsacre," but the declines started back in January. "SaaSquatch" didn't quite make sense, not least because it's an actual SaaS company.
The second thing to know is that the software crash is definitely over, but also has further to go, judging by Wall Street analysis. BTIG writes that we "saw capitulation last week, but breaking under recent lows would suggest a deeper decline is under way." I'd say so, yes. UBS warns "uncertainty could linger," but the cause is fear of artificial-intelligence disruption, which validates AI's moneymaking potential, which "ultimately should benefit both the intelligence and application layers" of software. I think my uncertainty just lingered.
Deutsche Bank isn't more decisive on the selloff, but at least it has a SaaSsacre shopping list. Its four favorite beaten-down software stocks in a moment. First, a brief explainer for noncoders.
I do a podcast -- who doesn't? A former audio producer of mine, Jackson Cantrell, left me for garbage or, as he puts it, an industrial composting start-up. His outfit collects a million pounds of waste a month from hotels, stadiums, and grocery stores, turns it to fertilizer inside 53-foot machines just south of Los Angeles, and drops it off at family farms. There's homegrown software, too. It started with a dashboard for customers to track waste, and expanded to apps for drivers, and AI for analyzing garbage bills and identifying food waste from images.
At first, the company used an outside coder, but back-and-forth requests were a hassle. Cantrell's software experience was limited to a college class that culminated in him making a "buggy version of Flappy Bird," which doesn't sound like bragging. AI coding assistants detect errors and recommend improvements, but they didn't make programs from scratch -- until recently. Cantrell used a new tool called Vercel v0. "I was able to just sort of whisper into this machine, and it would come out with a result that was much closer to what I wanted," he says. "And if I needed to make a tweak, it would happen instantly."
Cantrell says he's experimenting with "vibe coding," which I hear a lot, and sometimes mistakenly call jive coding, which works, too. It means making software quickly and creatively using intuition rather than a formal plan. He remade his personal website while he slept using something called Gas Town, which sounded to me like the next exit past Flavor Town, but is apparently a "cognition engine" where AI agents supervise other AI agents to get coding jobs done.
This is obviously concerning to companies that charge for programming, and to their investors. On Wednesday, Deutsche Bank's software analysts noted that stocks in their universe were down 19% year to date. "While difficult to disprove the bear narrative in software, given fears are more about [generative AI] implications for the industry in the out years," they wrote, "we contend that any meaningful disruption will likely play out over a much longer timeline than investors anticipate." That sounds comforting. But also, "we are more concerned about switching costs in software being eroded by cheaper code generation, reduced integration costs, and easier change management, which could impact software economics going forward." That sounds worrisome. Maybe it's too early to buy the SaaStastrophe.
Deutsche Bank scored its Buy-rated software stocks on "barriers to exit" for customers and "the ability to adapt to the gen-AI era." It then overlaid a valuation screen on its score card, and came up with four names. Cellebrite is an Israeli maker of digital forensics and intelligence tools and trades at an enterprise value (or stock market value adjusted for debt and cash) of 17 times free cash flow. Salesforce, a giant in tools for managing interactions with customers and prospects, goes for 11 times. Intuit, which is intimately familiar to anyone who is now TurboTaxing for refund checks, is 16 times. And ServiceNow, a digital operations hub for workers, sells for 18 times.
Changing topics: Tech stocks have been toppling, and UBS recently downgraded the sector, citing an imminent slowing of spending growth for AI hyperscalers. It reckons their capital investments will consume all of the cash from operations this year, versus a 10-year average of 40%. But long-neglected stock market pockets are getting a fresh look. Vanguard Value exchange-traded fund, a proxy for cheap stocks, is up 7% so far this year, while Vanguard Growth is down 6%.
I had postearnings chats recently with a pair of CEOs whose stocks are coming around. AGCO makes farm equipment. I know: I wrote a lengthy cover story on beef and ranching in this week's Barron's. When I suggested to an editor that tractors warrant a mention here, he asked whether I was trying to turn us into Cattle and Crop Weekly. Not all at once. Anyhow, think of this as a momentum stock item, because AGCO is suddenly up 33% this year.
Under Eric Hansotia, AGCO is cutting waste, clearing out dealer inventories, and hitting record market share, including by selling data-driven systems that farmers can use to upgrade old machines, regardless of brand. It's a good fit for a frugal moment, with farmer incomes this year projected to come in 24% below their 2022 peak. "We're on the trajectory to be able to automate activities all the way around the crop cycle by 2030," he says.
Patti Poppe was brought in to turn around California utility operator PG&E in early 2021, after it was blamed for devastating wildfires. She points out that the company just reported its third year of double-digit percent growth in earnings, and that it has been lowering customer bills. I asked if she knew that her stock was outperforming Nvidia -- year to date, that is. It's up 9%. "You have to start somewhere," she says.
Write to Jack Hough at jack.hough@barrons.com. Follow him on X and subscribe to his Barron's Streetwise podcast.
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(END) Dow Jones Newswires
February 13, 2026 12:10 ET (17:10 GMT)
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