AI Disruption Reshapes Wall Street Software Targets
Major brokerages downgraded legacy software stocks including Adobe and Workday on mounting AI disruption risks, while upgrading infrastructure and consumer plays, signaling a broad valuation reset for the sector.
Morgan Stanley spearheaded a sweeping reassessment of enterprise software, downgrading Adobe to Underweight with a slashed price target of $240 from $365. The bank warned that generative AI disruption clouds the company's path to annual recurring revenue reacceleration, arguing its current transitions "compound execution risk." Workday was similarly cut to Underweight, with its target reduced to $145 from $185, as analysts judged AI-driven growth to be too gradual to justify its current valuation.
The bearish turn extended across the software sector. Morgan Stanley also downgraded Salesforce, Intuit, Elastic, and JFrog to Equal Weight. Jefferies moved Datadog to Hold from Buy, raising its target to $280 but noting that the thesis of the company as an AI beneficiary has largely played out in the first half of 2026.
AI disruption is not limited to internal execution hurdles. Rothschild & Co Redburn downgraded Shopify to Neutral, cutting its price target to $130 from $160. The firm pointed to Meta Platforms pivoting its consumer AI assistant into a small business tool, a move expected to give Meta a "longer growth runway, wider moat, and higher margins and returns" at Shopify's expense.
While software faces a reset, AI investment continues to lift hardware infrastructure. Morgan Stanley upgraded Fortinet to Equal Weight from Underweight, more than doubling its price target to $133 from $80. The firm admitted its previous sell thesis missed the strength of the hardware cycle driven by AI preparedness.
Outside the tech sector, analysts found value in consumer resilience and financials. Bernstein upgraded Five Below to Outperform with a $250 target, citing a sustainable mid-single-digit comps outlook. Raymond James lifted Ralph Lauren to Outperform with a $410 target after "very positive" channel checks showed accelerating digital traffic.
HSBC upgraded Goldman Sachs to Hold from Reduce, boosting its target to $995 from $834 on a better earnings outlook and valuation compression. In healthcare, Jefferies lifted AdaptHealth to Buy with a $13 target, viewing the stock as "now positively biased" following the divestiture of its underperforming diabetes business.
Susquehanna downgraded Live Nation to Neutral with a target of $186, warning there is "little room for error" in its upcoming earnings report after a 27% year-to-date share price rally.
