SuperworthThe market already believes it about the losers
Consultants and software makers trade near ten-year lows while their revenue still grows. The open question is who keeps the savings.
A thesis by Superworth
Helped
- NVDASells the compute. Fwd PE 19.1, cheaper than 96% of its ten years, with consensus adjusted EPS up 71%.
- MSFTSells AI inside the software people already use. 55 times free cash flow, higher than 99% of its ten years.
- GOOGModels plus cloud. Fwd PE 26.2 near its 25.0 median, but 79 times free cash flow, above 99% of its ten years.
- ANETData center networking. Fwd PE 47.3, higher than 99.6% of its ten years. The priced-in side of the idea.
- ETNPower equipment for data centers. Fwd PE 29.6, higher than 93% of its ten years.
Exposed
- ACNBills clients for people's time. Fwd PE 12.5, cheaper than 97.5% of its ten years, revenue still up 6.7%.
- CTSHIT outsourcing. Fwd PE 9.7 against a ten-year median of 16.4, though up 43% in three months.
- INFYIT outsourcing. Fwd PE 13.3, cheaper than 99.6% of its ten years.
- ADBECreative software sold by the seat. Fwd PE 8.9, cheaper than 99% of its ten years, revenue up 12%.
- INTUTax and small business software. Fwd PE 12.4 against a ten-year median of 32.9, with consensus EPS down 3.4%.
- CRMSeat-based sales software. Fwd PE 15.9, cheaper than 94% of its ten years, with consensus EPS down 12.7%.
- AONInsurance broker. Fwd PE 14.7, a ten-year low, reached after a debt-funded 17B deal for USI rather than on AI news.
- WTWInsurance broker hit hardest by the February AI scare. Fwd PE back to 14.4, above a quarter of its ten years.
Consulting sells hours, and hours are what AI removes
Accenture bills for people's time. It trades at 12.5 times the next twelve months, cheaper than 97.5% of its ten years, against a median of 25.4. Cognizant (9.7 vs 16.4) and Infosys (13.3 vs 21.6) sit near their lows too. Accenture fell a record 20% on 18 June on a soft outlook, though revenue grew 6.7% over the year. Accenture and Cognizant have since risen over 40% in three months, so part of the fear has reversed. Forward PE history is rebuilt with hindsight.
Software is priced for the same fear
Adobe trades at 8.9 times the next twelve months, cheaper than 99% of its ten years, against a median of 29.1. Intuit is at 12.4 (median 32.9) and Salesforce at 15.9. All three bottomed in June on the worry that AI agents do the work people buy software seats for. The fear is in the estimates too: consensus sees adjusted EPS falling 3.4% at Intuit and 12.7% at Salesforce. Forward PE history is rebuilt with hindsight.
The fear reached the brokers, then faded
Insurance brokers match buyers with policies, a task AI apps now attempt. Broker shares sank on 9 February when quoting apps went live inside ChatGPT, Willis most at 12%. Willis has since recovered to 14.4 times the next twelve months, above a quarter of its ten years. Aon sits at 14.7, the lowest of its ten years (median 19.9), but it hit that low in September after a debt-funded 17B deal for rival USI, not on AI news. Forward PE history is rebuilt with hindsight.
The builders are not priced at a premium on earnings
Nvidia sells the compute and trades at 19.1 times the next twelve months, cheaper than 96% of its ten years (median 33.9), while consensus sees adjusted EPS up 71%. The price is 3% below its May high, so earnings have outrun the price. Microsoft is at 25.7 against a 27.7 median and Alphabet at 26.2 against 25.0. A low multiple on fast growth says the market doubts how long the spending lasts. Forward PE history is rebuilt with hindsight.
The market pays up for the plumbing
The premium sits in the gear that connects and powers data centers. Arista trades at 47.3 times the next twelve months, higher than 99.6% of its ten years, against a median of 30.8. Consensus sees adjusted EPS up 25%. Eaton, which sells power equipment, is priced higher than 93% of its ten years. On this side the idea is already in the price. Forward PE history is rebuilt with hindsight.
The builders' premium is on cash, not earnings
Microsoft trades at 55 times trailing free cash flow, higher than 99% of its ten years (median 33.6). Its free cash flow fell to 67.0B from a 78.0B peak in September 2025 while revenue grew 17.8%. Microsoft says capital spending hit 41B in the June quarter, two thirds of it CPUs and GPUs. Alphabet is at 79 times, also above 99% of its ten years, after its free cash flow fell 27% in two quarters. AI revenue has to outgrow the spending.
The quiet winners may be the buyers of the work
Firms with big back offices could keep the savings. JPMorgan said in May 2025 it expects operations headcount to fall about 10% over five years with AI. It trades at 14.4 times the next twelve months, above 85% of its ten years (median 12.3), on consensus adjusted EPS up only 1.4%. Bank of America at 11.5 sits below its 12.3 median. But on price to book, both sit above 97% of their ten years. And the savings may pass to customers, not shareholders.
What would prove the fear wrong
Adobe's trailing revenue grew from 19.4B to 26.0B in three years and is still up 12%. Consensus sees 28.4B over the next four quarters. If automation creates more work than it removes, the June lows were the mistake, and Adobe is already 23% above its low. If revenue follows the price down, the market was early, not wrong. The next tests are Accenture's results on 1 October and Adobe's on 9 December.
What has happened lately
- CNBC, AI fears pummel software stocks: Is it 'illogical' panic or a SaaS apocalypse?The software selloff in one piece: new AI agent tools set off fears that agents replace the seats software is sold by.
- Bloomberg, Insurance Broker Stocks Sink as AI App Sparks Disruption FearsWillis fell 12%, Gallagher 9.9% and Aon 9.3% in a day when insurance quoting apps launched inside ChatGPT.
- Bloomberg, Accenture Forecast Sends Stock Tumbling a Record 20%The quarter was fine but the outlook and new consulting bookings were soft, and analysts named AI as a drag on consulting demand.
- Seeking Alpha, Aon falls 10% on $17B USI acquisitionAon agreed to buy USI from KKR for 17B in cash funded with new debt. This, not AI, set off the fall to its ten-year low multiple.
- Microsoft, Microsoft Fiscal Year 2026 Fourth Quarter Earnings Conference CallCapital spending of 41B in the quarter including finance leases, two thirds on short-lived CPUs and GPUs, and free cash flow of 19.6B 'reflecting higher capital expenditures'.
- JPMorgan Chase, 2025 Investor Day transcriptThe consumer bank said operations headcount should trend down about 10% over five years with AI, even as the business grows.
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An idea, tested against what the prices already assume.
A thesis tests an idea against prices. It is not investment advice.