Morgan Stanley: European software stocks frustrated by analysts downgrading ratings and increased hiring efforts.

Morgan Stanley analysts wrote that as analysts lower their target prices for the European software sector, stocks in this sector are expected to underperform the market. These analysts stated that while other industries are laying off employees, software companies are increasing their workforce, a factor that also puts pressure on stock prices. Since the beginning of the year, software stocks have been heavily sold off as investors worry about competition from AI intelligence. The analysts stated that this sentiment will "continue to weigh on this sector... Meanwhile, AI models continue to advance." They added that even if investors are not as concerned about the threat from AI, this sector will still underperform the market. Morgan Stanley has lowered its outlook for the European software sector by two levels to underweight.