①Goldman Sachs, in its latest report, may have already ‘cracked’ the market’s ‘primary conundrum’; ②they are currently attempting to delineate the boundary between ‘high-quality’ and ‘low-quality’ software stocks through hedging strategies, maintaining exposure to the software industry while providing a safety net for companies facing ‘existential threats’.
Over the past month, software stocks have undoubtedly experienced an incredibly challenging few weeks. These stocks, once considered to possess strong competitive moats, are now facing what Aaron Nordvik, Head of Macro Equity Strategy at UBS Group’s Global Markets division, describes as an ‘unresolvable existential threat posed by AI disruption.’
Among them, the SaaS sector has suffered the most, with many market participants even lamenting that ‘the end of SaaS has arrived.’ Currently, Goldman Sachs’ TMT SaaS Index has fallen to its lowest level since May 2025.
In the current environment of rotation/diversification/panic selling, attempting to determine which stage the market is in seems utterly futile — the disruptive impact of artificial intelligence continues to leap from one sector to another on a daily basis.
As Cailian Press has reported in recent days, the SaaS sector was the first casualty under the terror of AI disruption, followed by private credit, insurance brokers, wealth management firms, and then commercial real estate and logistics enterprises on Wednesday and Thursday…
This has left many investors thoroughly perplexed, forcing them to retreat into a corner and ‘tremble with fear’…
However, Goldman Sachs, in its latest report, may have already ‘cracked’ this market’s ‘primary conundrum’ — they are currently attempting to delineate the boundary between ‘high-quality’ and ‘low-quality’ software stocks through hedging strategies, maintaining exposure to the software industry while providing a safety net for companies facing ‘existential threats’.
On Thursday, Goldman Sachs analyst Faris Mourad provided a detailed explanation of the operational mechanism of this new software stock hedging strategy (GSPUSFTX), which is structured as follows:
Take long positions in the following basket of companies (code: GSTMTSOL):
Software companies that are difficult to replace with AI due to physical execution requirements, regulatory barriers, integration complexity, or human accountability.
Enterprises that directly benefit from the widespread adoption of AI (computing power, data infrastructure, observability, security, hyperscale cloud, and AI development platforms)
Short the following basket of companies (code: GSTMTSOS)
Companies primarily driven by software-based workflows, as artificial intelligence increasingly automates or reconstructs these processes within enterprises, potentially reducing the demand for outsourcing.
Goldman Sachs expects that GSTMTSOL will recover from the recent sell-off in software stocks, while GSTMTSOS will continue to underperform.
Below is the recent performance of this hedging strategy—the ratio between GSTMTSOL and GSTMTSOS.
In terms of performance, Goldman Sachs noted that sales estimates for GSTMTSOL are experiencing a doubling in growth, while GSTMTSOS has remained stagnant since 2023.
From a price-to-earnings ratio perspective, a divergence between the two has also become evident.
So, what specific stocks are included in Goldman Sachs’ baskets representing software winners (GSTMTSOL) and software losers (GSTMTSOS)? Below are the detailed lists.
Software Losers (GSTMTSOS)
Notable names on the list of losers include:$Accenture (ACN.US)$、$Cognizant (CTSH.US)$、$Duolingo (DUOL.US)$、 $Gartner (IT.US)$ 、 $SAP SE (SAP.US)$ 、 $Unity Software (U.US)$ , etc.
Software Winner (GSTMTSOL)
Notable names on the list of winners include:$Microsoft (MSFT.US)$、 $Alphabet-C (GOOG.US)$ 、$Oracle (ORCL.US)$、$CrowdStrike (CRWD.US)$、$Palantir (PLTR.US)$、$Synopsys (SNPS.US)$、 $Zoom Communications (ZM.US)$ , etc.
In addition, regarding the overall situation of software stocks at present, Goldman Sachs pointed out that if the software industry is evaluated based on price-to-earnings ratio rather than enterprise value/EBITDA (EV/EBITDA), it can be said that the industry’s valuation has largely returned to a reasonable level comparable to the broader market.
A year ago, the software sector’s price-to-earnings ratio reached 51 times, making it the most expensive sector in the U.S. stock market without question. However, the current price-to-earnings ratio of software stocks has fallen back to 27 times, and it is no longer the highest-valued industry. The media, automotive, semiconductor, and capital goods sectors all have higher price-to-earnings ratios than the software industry.
From the perspective of earnings growth, there is no difference between the expected growth rates for 2026 versus 2025 and for 2027 versus 2026. The earnings growth rate for the software sector over these two years is projected to reach approximately 16%. This may indicate that equity investors’ valuation criteria for the software industry are changing, as they can no longer justify an unjustifiably higher price-to-earnings ratio compared to other industries.
Moreover, from the perspective of sales growth, the software industry still maintains a significant advantage compared to other equity markets.
The well-known financial blog Zerohedge noted, “Could this be the trade of the year? We don’t know yet, but it undoubtedly provides a reference for reducing portfolio diversification risks and avoiding pitfalls, while also offering an entry point for decreasing or increasing (given that the current net long position is near historical lows) allocations in the software sector.”
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Editor/Rice
