The Zhitong Finance App notes that fears that artificial intelligence will impact software companies have prompted more and more Wall Street analysts to suggest selling Adobe (ADBE.US) and CRM.US (CRM.US) shares. This bearish sentiment has reached a level not seen for many years.
Morgan Stanley is the latest agency to issue a warning about this risk, and the bank downgraded the stock ratings of these two companies and several others in the industry. Since the beginning of June, at least 5 institutions (including Stifel, Evercore ISI, Wolfe Research, and Phillip Securities) have downgraded Adobe's ratings, and by 2026, more than a dozen institutions have downgraded their ratings.
Following these downgrades, Adobe's overall recommendation rating (a measure of the ratio of buying, holding, and selling ratings) has dropped to 3.3 out of 5. According to the data, this is the lowest level since the 1990s. As for SAFE, after Morgan Stanley and KeyBanc Capital Markets recently downgraded their ratings on the grounds of their Agentforce AI products, this figure dropped to 4.4, a new low since 2012.
These moves highlight the market's cautious attitude towards the software sector. The sector has been under heavy selling pressure this year due to concerns that competition from AI services will permanently reduce the industry's growth potential, pricing power, and gross profit margin.
Adam Wood, an analyst at Morgan Stanley, wrote, “As the disruptive controversy over generative AI intensifies and blocks the path of annual repeatable booking revenue (ARR) to re-accelerate, Adobe's simultaneous transformation in freemium models, leadership changes, and reinvestment has increased its execution risk.”
Wood added that while current valuations have absorbed “most of this disruptive risk, Adobe's simultaneous transformation has reduced visibility — which in turn undermines our confidence in the timing and intensity of its potential steady recovery in performance.”
Adobe analysts fall in sentiment
In response to SAFE, Morgan Stanley's Elizabeth Potter wrote that the key performance indicators for the company's Agentforce AI products “have yet to drive organic growth to an inflection point because the drag of traditional business portfolios remains.”
Morgan Stanley also downgraded the ratings of several other companies in the software space, including Workday Inc., Intuit Inc., JFrog Ltd., Elastic NV, PagerDuty Inc., Rapid7 Inc., SPS Commerce Inc., BlackLine Inc., and Vertex Inc. However, the bank raised the rating of cybersecurity software company Fortinet Inc., to “the same level as the market,” believing that the company has a “solid recent performance pattern.”
iShares Expanded Tech-Software Sector ETF (iShares Expanded Tech-Software Sector ETF), which is a widely referenced indicator for this sector, fell 1% on Tuesday, extending its cumulative decline since this year to 13%. Adobe has plummeted by 3.7%, and has accumulated a cumulative decline of more than 35% since this year. Saiflex fell 1.6%, and has already accumulated a 36% decline in 2026.