UBS Predicts Microsoft, ServiceNow, and Autodesk to Outperform Despite Software Sector Concerns

Despite growing anxieties surrounding a potential slowdown in the software industry driven by artificial intelligence, UBS analysts are maintaining a positive outlook on select companies, including Microsoft, ServiceNow, and Autodesk. The firm believes these companies are well-positioned to thrive even amidst broader sector challenges.

AI-Driven Concerns and Software Sector Slump

Recent concerns stem from the potential for AI-powered services, such as Anthropic’s ‘Claude Cowork,’ to replace traditional software offerings. This has led to downward pressure on software stocks, with a notable sell-off in early February 2026. However, UBS argues that the U.S. Software industry remains a significant source of profit and historically benefits from a weaker dollar.

UBS’s Bullish Stance on Key Players

Andrew Garthwaite, a strategist at UBS, noted in a client memo that the price-to-earnings ratios (PER) of software stocks are currently below their historical averages, suggesting they may be oversold. UBS specifically highlighted Microsoft (NASDAQ: MSFT), ServiceNow Inc. (NASDAQ: NOW), and Autodesk Inc. (NASDAQ: ADSK) as companies likely to see their shares rise, even in a slowing sector. HubSpot has also been identified as a stock with potential, despite recent significant declines.

Financial Performance and Valuation

As of late 2025/early 2026, Microsoft and Autodesk had both experienced a roughly 22% decrease in value over the past six months, although ServiceNow saw a more substantial 40% plunge. HubSpot experienced the most significant decline, collapsing 69% over the past year. Despite these declines, UBS points to positive earnings revisions and P/E ratios below historical norms as indicators of potential recovery.

Decoupling from AI Credit Spreads

UBS also observed that software stocks appear to have decoupled from artificial intelligence credit spreads, a potentially bullish sign. For example, Oracle’s stable credit default swap rate in 2026 contrasts with the underperformance of the broader software sector, which has lagged the market by 19%.

Broader Market Context and Bubble Concerns

UBS global equity strategist Andrew Garthwaite has also been assessing the risk of a stock market bubble, noting that six out of eight warning signs are currently flashing. While not yet in a full-blown bubble, the current conditions bear similarities to those seen in 1997, rather than the peak of the dot-com bubble in 1999. This suggests a potential for significant market decline, but also opportunities for selective investment.

Key Takeaways

• UBS remains optimistic about Microsoft, ServiceNow, and Autodesk despite AI-related concerns impacting the software sector.
• Software stocks are currently trading at P/E ratios below their historical averages, potentially indicating an oversold market.
• The U.S. Software industry benefits from a weaker dollar and remains a significant source of international earnings.
• A decoupling between software stock performance and AI credit spreads suggests potential for future gains.
• UBS is monitoring for signs of a broader market bubble, with six out of eight warning signs currently present.