Morgan Stanley: Software Sector Overly Pessimistic, List of 8 High-Conviction Picks Unveiled

TechFlow News, according to TechFlow Research, Morgan Stanley's July 21 software industry report pointed out that the software sector has underperformed Nasdaq by 40% and S&P 500 by 30% over the past two years. Market concerns about AI disruption have been overpriced. Morgan Stanley maintains an "Attractive" rating for the software industry.

The report introduces a "Moat + Journey" dual-dimension evaluation framework, identifying 8 high-conviction overweight targets: Microsoft, Palo Alto Networks, CrowdStrike, Shopify, Cloudflare, ServiceNow, Datadog, Snowflake. At the same time, Adobe and Workday were downgraded to underweight.

Morgan Stanley pointed out that the core value of AI is concentrated in the workflow layer, with models themselves being only underlying tools. Proprietary data, access control, and business process logic possess higher scarce value. Microsoft's moat and growth journey performance ranks first in the industry; Azure growth is constrained by capacity supply, while end-user Copilot deployment adoption continues to accelerate. Palo Alto Networks and CrowdStrike fully benefit from AI security expansion and industry platform consolidation trends. Snowflake and Datadog continue to realize benefits from AI infrastructure. Adobe and Workday's AI monetization implementation pace is relatively slow, and the market waiting cost is relatively high.