AI Disruption: Moats and Value Traps

Sparkline Capital

Kai Wu

Research

12 Pages

Sparkline Capital examines whether beaten down software stocks are bargains or value traps as AI changes the competitive landscape. It argues traditional valuation can misread disruption, while intangible assets may better separate survivors from firms whose moats are eroding.

Key Takeaways

Software Looks Cheap: Software stocks now trade at roughly a 10% discount to the market after years of commanding premium valuations.
Disruption Risk Spreads: Over 72% of US companies and 78% of market capitalization now face disruption, making traditional value screens harder to trust.
Dispersion Creates Opportunity: Among disruption scare stocks, 10% doubled and 16% fell by half over the next 12 months.
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