Rapid advancements in artificial intelligence have fueled market fears of "AI displacement," triggering a significant sell-off in the U.S. software sector recently. Beyond major software stocks, Goldman Sachs highlighted that alternative asset managers and direct lending institutions are also feeling the impact. However, some experts, including analysts from Wall Street investment bank Wedbush, still identify related investment opportunities.

Dan Ives, Global Head of Technology Research at Wedbush Securities, stated that this year will be a breakthrough period for Apple (AAPL.US). In an interview, Ives predicted that AI could potentially add "$75 to $100 per share" to the company's valuation. He dismissed concerns regarding European regulators and emphasized Apple's aggressive strategic positioning in consumer AI. He compared this situation to Alphabet (GOOGL.US)'s strong performance last year.

Jeff Kilburg, Founder, CEO, and Chief Investment Officer of KKM Financial, noted that investors have been selling previous winners like Nvidia (NVDA.US) and Meta (META.US) and rotating into laggards such as Apple and Alphabet. These stocks presented buying opportunities during the downturn around last April's tariff announcements. Kilburg expressed particular optimism about Alphabet's momentum, highlighting that the company's revenue surpassed the $400 billion mark for the first time. He also emphasized efficiency improvements in Google's Gemini platform, which now processes 10 billion tokens per minute, while service costs have decreased by 78% within a year.

Despite what Ives termed a "software apocalypse," characterized by massive selling across the industry, both analysts see opportunity amidst the turmoil. Ives described the current moment as a time to "pound the table" and buy oversold stocks like Salesforce (CRM.US), CrowdStrike (CRWD.US), Microsoft (MSFT.US), Oracle (ORCL.US), and ServiceNow (NOW.US). Ives said, "We will look back on this as a great opportunity to buy stocks that I believe have been heavily sold off."

The analysts also addressed volatility in the cryptocurrency market. Kilburg compared MicroStrategy (MSTR.US) to a "falling knife," as the stock has declined 72% from its all-time high. Kilburg stated, "Crypto, broadly, is in a moment of truth," noting that during difficult times, cryptocurrencies "can get too cold and don't align with the overall global macro sentiment."

Despite the current turbulence in technology and crypto markets, both analysts maintain a long-term optimistic outlook. Ives characterized the sell-off as a "digestion phase" rather than a fundamental shift. He stressed, "This is not the end," suggesting the current indiscriminate selling presents significant opportunities for investors willing to withstand market volatility.

Meanwhile, a team led by Goldman Sachs analyst Alexander Blostein indicated earlier this week that ongoing concerns about AI's risks to the software industry are putting pressure on alternative asset managers and direct lenders. Over the past month, the VanEck Alternative Asset Managers ETF (GPZ) has fallen 14%, while the S&P 500 declined only 0.8% over the same period. Concurrently, the VanEck BDC Income ETF (BIZD) dropped 7.8% in the past month.

In a report to clients, Blostein and colleagues wrote, "The significant sell-off in alternative asset managers is primarily due to investor concerns about the group's software exposure within private equity and private credit businesses, and the potential growth impact if investment performance deteriorates." Although data is limited, especially in private equity, Goldman Sachs' preliminary assessment indicates that alternative asset managers' underlying software exposure at the corporate level is "relatively small," with private equity software exposure accounting for approximately 5% of total management fees. They noted that the average contribution from private credit/direct lending management fees is similarly modest.

Naturally, variations exist between companies. TPG (TPG.US) and KKR (KKR.US) have relatively higher exposure within private equity, with each having management fee exposure to the software industry in the single-digit percentage range. Blue Owl (OWL.US) and Ares Management (ARES.US) have relatively higher exposure in private credit, constituting 13% and 8% of their management fees, respectively. Goldman Sachs analysts estimate that The Carlyle Group (CG.US), Apollo Global Management (APO.US), and Brookfield Asset Management (BAM.US) have the smallest exposure to software investments.