Post reproduces Akre Capital Management's early-2026 commentary arguing that AI-driven multiple compression in its software-oriented holdings is overblown and that AI benefits will accrue to incumbent software users rather than tool providers.
CSU.TO — LONG Akre argues Constellation Software's 22% 2025 drawdown came from valuation multiple compression on fears AI will disrupt software businesses, a narrative it calls overblown. The manager's stated mechanism is that customer intimacy, ecosystem/workflow dominance, trust and proprietary data make such incumbents the primary beneficiaries of AI, while LLM tools are commoditized and price competitive. Catalyst: earnings growth expectations for the portfolio are unchanged from mid-2025, so lower multiples mean improved value entering 2026. Main stated risk: the businesses are 'degraded or disrupted by artificial intelligence'.
We believe this narrative to be overblown and that our businesses will be enormous beneficiaries of AI.
ROP — LONG Roper Technologies is named among Akre's holdings whose 2025 decline (down 13.84%) stems from AI-related multiple compression rather than deteriorating fundamentals. The manager holds that value from AI accrues to 'already-advantaged' users of AI tools with workflow dominance and proprietary data, not to the tool providers. Catalyst: unchanged aggregate earnings growth expectations imply the lower valuation is improved value at the start of 2026. Main stated risk: AI degrading or disrupting these software-oriented businesses.
When valuations decline materially but expected earnings power is undiminished, improved value is the result.
CCCS — LONG CCC Intelligent Solutions is listed as a holding down 32.23% in 2025, which Akre attributes to the same AI-disruption multiple compression affecting its software-oriented names. The claim is that businesses with customer intimacy, ecosystem and workflow dominance and proprietary data capture the financial benefit of AI, making their share-price drawdowns a valuation rather than an earnings problem. Catalyst: portfolio earnings growth expectations unchanged from mid-year, so the drawdown improves forward value. Main stated risk: AI tools disrupting the underlying business.
much of the business and financial benefit from AI will accrue to the already-advantaged users of these tools
CSGP — LONG CoStar Group is cited among Akre's holdings whose 2025 decline (down 6.08%) reflects investor concern that AI will disrupt software-oriented businesses. Akre disagrees, arguing these incumbents co-opt technological shifts and that AI is the first seismic shift to favor incumbents over new entrants. Catalyst: the manager's aggregate earnings growth expectations are unchanged since mid-year while valuations fell, which it frames as improved value entering 2026. Main stated risk: AI-driven degradation of the business.
Our earnings growth expectations for the portfolio in aggregate are unchanged from mid-year when these share price drawdowns started in earnest.
NVDA — AVOID The commentary claims investor excitement has over-favored providers of AI tools, explicitly including chip designers such as Nvidia, over users of those tools. The stated mechanism is that many AI tools from LLMs are already largely commoditized — widely available, highly price competitive, with low switching costs — so less of the financial benefit accrues to tool providers. This is a relative-value argument rather than an explicit short; the stated risk is that value instead accrues to already-advantaged user businesses, leaving provider valuations unsupported.
Investor excitement to date has dramatically favored AI tool providers over users.