Is It Time to Buy Software Stocks?

Speakers

Ben Carlson — Host / Director of Institutional Asset Management at Ritholtz Wealth Management

Michael Batnick — Managing Partner at Ritholtz Wealth Management

Josh Brown — CEO of Ritholtz Wealth Management

Summary

The "Asset Light" software thesis of the last 15 years has inverted; the market now favors "Heavy Asset / Low Obsolescence" (HALO) stocks over information merchants.
AI is viewed not just as a disruptor of code, but as a deflationary force on headcount, which threatens the "per-seat" pricing models of major SaaS companies.
The streaming wars have concluded with Netflix as the victor, but the company now faces a "slog" of merger execution risks and a new battle for attention against YouTube.
Energy stocks are breaking out, with technical setups suggesting a potential multi-year secular bull market for the sector.

Trade Ideas

Ticker	Direction	Speaker	Thesis	Time
WDAY /FDS /NOW /CRM /IGV /SPGI /MNDY	AVOID	Josh Brown CEO, Ritholtz Wealth Management	"We are separating the market into two camps... Information merchants... and legacy platforms... the value of selling information to people is declining at a precipitous rate." For 15 years, the market fetishized "asset-light" software models. AI has flipped this. If AI reduces corporate headcount, the "per-seat" pricing model (SaaS) of companies like Salesforce and Workday collapses because there are fewer humans to sell subscriptions to. Furthermore, AI can replicate "information merchant" value propositions cheaply. Avoid "Vertical Market Software" and companies selling pure IP/Information; they are the "losers" in the AI shift. AI adoption might be slower than expected, or these companies successfully pivot to consumption-based pricing.	3:24
CONSUMER STAPLES /MATERIALS /INDUSTRIALS	LONG	Josh Brown CEO, Ritholtz Wealth Management	"I am calling those the Halo stocks... heavy assets low obsolescence risk... Can Claude whip up a can of Diet Pepsi? No." In an AI-disrupted world, capital flees replicable code and flows to tangible, physical assets that AI cannot generate. Companies that move atoms (airlines, manufacturers, staples) have a moat that software companies no longer possess. Long "Halo Stocks" (Heavy Assets, Low Obsolescence). Global recession reducing demand for physical goods/commodities.	8:11
DVN	LONG	Josh Brown CEO, Ritholtz Wealth Management	"I bought Devon Energy last week... hit the best stocks in the market list." Energy stocks have been excluded from the market rally for two years and are now breaking out technically. Brown entered based on a technical setup and is managing it as a trade by raising trailing stops (currently at $40). Long as a technical trade, riding momentum. Oil price collapse or technical trendline breakdown.	—
XOM	LONG	Josh Brown CEO, Ritholtz Wealth Management	"I did that same trade with Exxon at 119... I'm starting to think about Exxon maybe being a long-term holding." The strength of the move in a mega-cap like Exxon suggests a regime change. Brown views this not just as a trade, but potentially the start of a 7-year bull market in energy, prompting a shift from "trading with stops" to "investing for the long haul." Long-term hold. Global energy demand destruction or regulatory shifts.	25:06
MSFT	LONG	Josh Brown CEO, Ritholtz Wealth Management	"Microsoft is a data center business... Azure." While generic SaaS is at risk, Microsoft owns the compute infrastructure (Azure) required to run the AI disrupting everyone else. It should not be lumped in with the "software crash" basket because it is effectively an infrastructure/utility play on AI workloads. Differentiate Microsoft from the broader software sell-off; it remains a core infrastructure holding. AI capex spend slows down without ROI.	0:12
BX	WATCH	Josh Brown CEO, Ritholtz Wealth Management	"We have apartment building gluts in Nashville in Austin... takes four years to bring that stuff online." The multifamily real estate market is efficient at creating supply, leading to gluts in specific hot markets. While this hurts rental prices, it highlights that large players (like Blackstone) own the assets, and regional oversupply is a specific risk to watch in the housing sector. Be cautious of multifamily exposure in specific overbuilt metros (Austin/Nashville). Interest rates drop significantly, reigniting demand and absorbing supply.	36:42
NFLX	AVOID	Josh Brown CEO, Ritholtz Wealth Management	"I sold 85% of my position... This is going to be two years of slop." Netflix won the streaming wars against legacy media (Disney/HBO), but the prize is a new war against YouTube (GOOGL) for attention. Additionally, the pending merger/acquisition activity introduces massive execution risk, labor disputes, and union issues (Director's Guild/SAG) that will weigh on the stock. The stock will be "under a boulder" due to deal complexity and saturation. Netflix successfully integrates acquisitions faster than anticipated or creates a "must-have" content monopoly.	0:45