John Coteauto (5:33)

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Ann Berry (5:49)

Weeks of 2026, roughly a trillion dollars in market value has been wiped from The S&P 500 software and services index in off that's been dubbed Software Mageddon or by a Jeffries analyst as the SAS Bocalus. Well, last week Anthropic debuted plugins for its Claude cowork agent that could automate tasks across legal, sales, marketing and data analysis. And as soon as people figured out just how powerful this is, we saw those shares tank even further. Well, I spent time this weekend digging into Claude and I just want to say a couple of things about why I did that. I'm a really big believer in if I'm going to talk about the impact of a tool like Claude on the markets, or if I'm going to walk into a board meeting to ask a management team how they're using AI effectively, or if I'm going to run a business myself and ask others to adopt using an AI tool, I really do have to get my own hands dirty and dig in there to figure out exactly what it is capable of before I then delegate out to others the task of coming back with a specific plan for enterprise adoption. So I spent this weekend, I spent part of the super bowl and part of my Saturday as well, literally going through Claude onboarding exercises, looking at YouTube lessons on how to use it, actually trying to figure out how to use the plugins on the likes of PowerPoint and Excel and reading about CLAUDE code. And I got to tell you, I really was impressed with what I saw. So much so that I thought why don't I ask Claude to assess its own risk to public software companies it may be trying to compete with. Now I can share with you the prompts that I use to try and get there because I wanted a structured answer that really breaks us down by different kinds of software category. And Claude returned the following answer. The answer is not uniform. Some categories face existential risk. Others like cybersecurity, may actually benefit. Here's how the landscape breaks down from the most vulnerable to the least. So John and I thought we would start there. We take a look at what Claude had to say about the risk of Claude to some of these publicly traded companies and we're going to weave in as well and make it super clear in its own our perspective and some of the overlay on this. But I got to tell you, this is just one person's view. I thought this was directionally correct and I think actually talking about some specific companies and some of these specific tickers that may be beneficiaries of or at risk from Claude would be a pretty interesting set of contacts as we continue to see the impact on these software stocks. John, let's start with what Claude calls Tier one high disruption risk. The work streams that could largely disappear as a result of tools like it. And not just Claude. Right. It's also Gemini, it's also Chat GPT. But the first one it points out it points to is pretty intuitive and that's content marketing, email automation and basic CRM outreach.

John Coteauto (8:35)

Right. And that makes sense. You can have one of these AI bots write an email for you or synthesize some information. And Claude points out that it already integrates with Slack and Canva to do some of these project management tasks already.

Ann Berry (8:49)

Right. And orchestrating marketing workflow. So here was really interesting to me and as I was actually going through the process of using it and really digging in, this is what I was struck by Claude Cowork, as you said, integrates with things like Slack and integrates with other systems. So the, the reason I'm now sort of sympathetic to why we've seen such a sell off in stocks like cub spot, down 70% in the past year. Intuit I'll come back to you down over 34% just year to date is I, I can foresee a situation in which the more Claude is plugged into these other systems, the more it learns and ultimately can mimic the systems themselves. And that to me is where the existential risk actually exists. It's not just the fact that Claude can actually attach to it and therefore take away some of the add on capabilities that people might pay for on a Hub sp. It's the fact that it could ultimately learn how to replicate HubSpot, ultimately in its entirety. So that was an interesting one. Intuit, let's just talk about that one. Because Intuit actually has got multiple different business lines. It does have QuickBooks, which is accounting for small and medium sized businesses. It's also got TurboTax, which helps obviously with folks's tax returns, both individuals and also businesses. But it also owns mailchimp.

John Coteauto (10:00)

Right, exactly. And that's so easy to duplicate. That's email marketing. And AI can now generate, personalize and optimize email campaigns without a dedicated platform. And Intuit has ITS shares down 34% already year to date. And just to talk about the TurboTax example, I know this is not AI, this is just a computer interface. But I remember the first time that I went to a tax preparer and I sat there while they typed in the answers into the computer and I thought, well, why am I paying someone to type my information into a computer? I can do it myself. And so the next logical extension I could see with taxes being filed. But I will say sometimes you have to know what to put in for taxes. You don't know every single possible angle or where you might get a deduction or something like that. So I could still see that being a bit of a moat where you might want to go to a tax prep person who can intuitively understand some of these things that are personalized to you.

Ann Berry (10:55)

That said though, if agents get smarter over time and specifically with respect to your individual tax filing entries, and you can see how year over year it's going to get smarter and able to get its arms around some of that nuance. I will just say too, one of the questions around all of this, as we're thinking as investors around what are the offsets to some of this risk? It does seem that Intuit is doubling down on this idea that in person and experiential and human augmentation of what the technology can do is key to it. I am seeing TurboTax physical locations pop up all around the city here in New York, basically saying, look, walk in and have the benefit of a human being as well as get the benefit of the best that AI can offer. That really is part of its strategy. So those are two again, that's content marketing, email automation and basic CR RM outreach. HubSpot, Intuit, two examples there that seem to be potentially at risk, and Claude itself identifying those as at risk. The second bucket here of high disruption risk is project management and workflow coordination. So on yesterday's show, I opened by talking about the threat to Monday.com which has seen its shares down nearly 15 year to date. Earnings were out yesterday and the word choppiness came out a lot from the management team. Asana is another one, John. Stock down 40 year to date. That one seems to be at risk as well.

John Coteauto (12:10)

Right, Exactly. If Claude and Gemini can replicate the core task management workflow, then the standalone tool becomes a data layer rather than a product. People interact with daily.

Ann Berry (12:19)

And one of the questions is, right, do you have a human being? Do you have you and me sort of having oversight as to what exactly the workflow should look like, designing it and then sort of staying on top of it, basically being the. What was the word when you. You got the orchestra conductor and being the conductor. But the question here is, actually, can AI ultimately become the conductor itself?

John Coteauto (12:39)

And sometimes I would say from experience, I would want AI to become the conductor, because even though these services, like for example, Monday.com might have some sort of interface that we work with, so many times I've worked different places where a manager might go in and have some preconceived notion of how something should work, and they're sort of fighting against the technology where maybe Monday.com is set up a certain way and they say, well, we'll do that, but on the side also just do this other thing that I'm used to. And so if, if I could go in and take those layers out, I think it's more efficient.

Ann Berry (13:10)

Yeah, the efficiency, isn't it, in the user experience. Let's also talk about design software. That's the next, next bucket, that sort of, in this tier, 1, high disruption risk, this one really intuitive. We've got Adobe. We've talked about this a lot, John. Adobe is down 23% in 2025. It had big losses in 2026. It's been investing heavily in its own AI and Firefly, while it's had a little bit more attention of its professional user. It seems to be the sort of everyday use professionals who are really saying we can go to cheaper, free alternatives out there.

John Coteauto (13:43)

Absolutely. And on top of that, the other one in that category, Shutterstock.

Ann Berry (13:47)

Yeah.

John Coteauto (13:47)

Which licenses out imagery that we've used forever. I saw an ad the other day from the New York State that had images of toddlers with cigarette smoke around them trying to make the point of that it's a bad thing. And I thought, oh, they used AI instead of having to get toddlers with smoke around them to prove the point. And so Shutterstock shares down 40% year. I can just see that I taking over.

Ann Berry (14:14)

Yeah, the other one that's interesting here and I'm sort of sad as I'm about to say this. So Canva, which has just the most amazing origin story, I mean the founder Melanie Perkins, just amazing was rejected so many times, ended up building this into a multibillion dollar business. And I thought when Canva came out, I use it, it's just a wonderful user experience. Now that was a hotly anticipated IPO for at one point in the end of 2025. Now spilling over into 2026, I've got are the Canva board and management team just sitting there going, gosh, if we're going to actually go public successfully, we're going to have to go back to the drawing board and figuring out how to articulate what a growth plan is going to look like in the age of competing against gen of the power that we're now seeing. So just an interesting nugget there as to how what we're seeing unfold in the software space potentially impacting select IPOs. Well, we're going to go to the next tier on this which is what Claude calls moderate disruption risk where AI compresses value but doesn't eliminate the category completely. And top of that bucket in here and tier 2, CRM and sales automate automation or enterprise grade. And the two companies identified most at risk here. I'll start with the first one is Salesforce Ticker of course. CRM down roughly 26% year to date, down 42% from its prior peak. JP Morgan says that the sector has been quote sentenced before trial. The bull cases itself, Salesforce's data moat is deep. It's got so much information embedded in there that that should provide some proprietary insights and that it's force product positions it as the orchestrator or the conductor of AI agents. That being said, the market hasn't really been buying that argument. Some folks have been actually quite vocal about saying, look, it's just not up to the innovation we're seeing outside of Salesforce. So that one, the jury feels like it's out. The one that came up here, which was interesting to me, John, is Freshworks FRH.

John Coteauto (16:07)

Right. And their shares are down 50% year over year. And one bear assessment is that they lack Salesforce's data model. You know they're doing the same kind of work but they don't have that deep scale data that that sales source has.

Ann Berry (16:19)

It's interesting. So I was on Bloomberg last week and I was asked the question what kind of moat do companies have? And my view, and this was before I spent my weekend immersed in Claude was companies need both, they need both the data as a moat and then they need the innovation to go and actually utilize that data effectively. So this sort of fresh works example falling into that bucket, the next tier 2 bucket HR, Payroll and Human capital management. This kind of makes sense to me. We've got workday down 30 year to date the company CEO has called AI disruption fears overblown market doesn't agree though clearly isn't buying it.

John Coteauto (16:54)

And for someone like myself, I'm not picking on workday but we've talked about this around the office. The user experience as an employee is quite negative for these things. Like if I go to try to find my paycheck or something, there's five different apps and portals and I never know where it is and there's logins and so this might be one where some people on the employee, employer, employer side are looking for some innovation.

Ann Berry (17:15)

Yeah, Paycom also by the way down 35% year over year. Next bucket here that's interesting is enterprise planning or an erp. Now Claude says this is the most defensible of the traditional software categories saying the ERP systems from the likes of SAP and Oracle are deeply embedded in how companies manage finance, supply chain and manufacturing and that ripping them out is a multi year knife nine figure project. Well SAP, let's start there. Shares down 25 year over year. This one's interesting John, because I've been involved in another a number of companies that have tried to put in place enterprise resource planning tools, ERP and specifically in industrials businesses where you've got complex manufacturing, complex logistics, inventory management, distribution networks to try to design and these are incredibly complicated and expensive things to go and implement. I've got to imagine it is also deeply expensive to try and extricate them or replace them with something else. So I do actually have just from firsthand experience some sympathy for the idea that these are going to be have a bigger moat around them. But what I worry about is that someone like me is sitting there looking at SAP saying no, no, I know that your cost of developing this is lower because of AI, you can't charge me as much. ServiceNow down 50% year over year. Service management deeply embedded. But it's expanding or has been trying to expand into Workflow automation, which does put it in competition with AI agents that again, people perhaps are not going to pay up for that capability just given the alternatives out there. Now, Tier three, just to wrap with a slightly more positive note, these are supposed to be areas that have less disruption risk, where is in fact a tailwind and not necessary necessarily a threat. And that is cybersecurity, which I find absolutely fascinating. It is such a dynamic sector at the moment.

John Coteauto (19:14)

Well, it seems like the more threats there are to cybersecurity software, the more that consumers are going to need a service like CrowdStrike or Palo Alto Networks. Those are both down year over year, but not those big numbers that we saw with the double digits. CrowdStrike down 3% year over year. And it is very interesting the battle of, of we keep talking about on the blockchain, for example, if we're talking about Bitcoin, is there going to be a bitcoin cracker that can figure out the passwords and it's going to destroy bitcoin, maybe with quantum computing or with AI. And so according to Claude, cybersecurity is still the area where these software companies are going to thrive.

Ann Berry (19:55)

Well, look, I thought this was super thoughtful. You know, we sort of made it clear where our own experience has been. But I think thought Claude Destruction answer in the right way. And I just to be super clear, we did go back and check obviously all the sources. We made sure that the web links were provided so that we could go and look at where the underlying data was coming from. And just our own experiences doing this every day was a gut check against what it is that we've been talking about on the show and also researching in a proprietary fashion ourselves. So I, I enjoyed the conversation, thanks for sticking with us through it. But we thought it was just an interesting point in time to take a step back, survey what's going on. And then ultimately it's up to you how you decide to, to trade around this. You've got some folks out there like Dan Ives who's been on the show, he's at Wedbush, who said on some of these names, not all of them, that the sell off is such that he thinks it's now been oversold. It's time to get back in there. And it's a buyer's market. You've got others out there, you've got bears saying, no, no, no, this is just the beginning, there's more to come. We haven't even seen what the next generation of models looks like and what that ultimately means in terms of this thesis of AI eating the software world. We're going to keep on watching this because there is a lot going on on. Let's take a break and when we come back, a spin through some of the headlines that move the markets today. There it is, the closing bell. It's 4pm on the east Coast. The markets are wrapping up for the day. So we have finished with a sort of interesting set of results across the indices. Given all the volatility we saw over the course of the trading session. The S and P finally finishing up down about a third of a percent. The NASDAQ also down at just under two thirds of a percent. The Dow on the other hand roughly flat closing up in the green 0.1%. Well within all of that some particular market headlines or stock by stock headlines that got us interested starting with Hog H O G. That's the brilliant ticker for the one and only Harley Davidson. Which by the way, fun fact inspires one of the most popular brand tattoos out there. While motorcycle sales for the fourth quarter fell 10% to 2 to $379 million coming in worse than some analysts had expected and the company reported wider than feared losses. Well, the cont for this is that Harley Davidson is in the thick of a turnaround with the company last August bringing in topgolf CEO to replace its own in order to steer the motorcycle giant through tariffs and also slowing demand for its famous cruiser bikes. The stock right now is trading close to its Covid depths so you can just see the extent of the investor sentiment issue here. But 2026 has been pegged as Harley's big transition year. It's got a new entry level model called the Sprint due out at a starting price under $6,000 to try to capture the hearts of riders. And there's a new global racing championship called the Bagger GP series. There it is experiential again. Scheduled to rev up this year too. Overall, today's earnings are warm up for a holistic strategic update everyone's waiting for. It's due out from the executive team coming to the market in May, but it's pretty clear that this iconic brand has die hard fans amongst investors too. The stock despite that messy, quite frankly disappointing earnings report, closing up in the green 4% despite all of this that on to Hasbro also happy but for different reasons because the turnaround at this one is going incredibly well. The toy company saw its stock hit a four year high today. Now that's on the back of 2025 results that included a 14 increase in full year revenue, a big part of that from a 45% growth and something we've got really big fans of here on the team at Brew Markets and that's the Wizards of the coast and Digital gaming segment. The division that includes the high margin contributions Magic which one of our team members Uena loves and also Monopoly go well. Consumer products on the other hand, that's traditional toys declined 4%. Although the market ad had expected this, the company did actually a really good job of communicating clearly throughout the year that the impact of tariffs and a timing shift in retail orders was likely to lead to that performance. One interesting nugget here, AI actually featured quite heavily in Hasbro's recent rejuvenation. The company did say that AI tools have saved about a million billion people hours of work this year. And even on the revenue side, I watched as the CEO Chris Cox gave an interview today on CBC saying that he expects AI to quote, create whole new categories and whole new collectibles. Collectibles being really key here because this phenomenon of kidd alts grown ups collecting toys and pieces of content driven memorabilia has been a big part of folks like Hasbro and and Mattel also too. So again AI helping to drive that possibly in the future according to the CEO. While Hasbro's 2026 outlook was rosy to projecting adjusted EBITDA, it's a measure of profit of up to $1.45 billion. And the board of directors authorizing a new share repurchase program of up to a billion dollars, getting cash back out to happy shareholders. Now though, on to two more big brand companies with earnings out today. Unlike Hasbro, both of these taking a stock hit. First up, Coca Cola, which forecasts mediocre revenue growth for 2026. That's after water expectations already. That's as demand for sodas weakened in North America and Asia. The incoming CEO Enrique Braun, who by the way is currently chief operating officer, he's already there, but not taking the big seat till next month. He said the soda OG must accelerate innovation to keep up with consumer preferences for low sugar products and the boom in weight loss drugs. Something we talked about by the way with the chief marketing officer at PepsiCo Beverages US right before the Super Bowl. So take a look at that episode if you want to learn more about what's going on in the Sodor Awards. And then next up, bp, the oil and gas giant down after today, suspending its share buyback program, saying it wants to fully allocate its excess cash to strengthen its balance sheet in the wake of lower oil prices. A real sign as to what's going on in the commodity markets. Just the final thought for today, a few seconds on Alphabet issuing over $30 billion in debt to date to fund AI capex. Just to put that in perspective, it has a market cap of over $3 trillion, its pre existing debt of under 60 billion. It's a cash flow machine so quite frankly it could have sold even more. But the reason that this bond issuance caught our eye, it included 100 year bond issued in pound sterling. Raising the teacup to that the fact that there are buyers for a piece of paper that does not get redeemed, at least in theory, for 100 years. A sign of confidence that Google's parent is going to be around for a long time. That's it for today's Blue Markets Daily.

John Coteauto (26:40)

Brew Markets Daily is hosted by Anne Barry, produced by John Coteauto, Taka, Bella Teeth and Emily Millar. Our Technical director is you, Jim Orzo is our audio engineer and the President of Morning Brew Inc. Is Devin Emery. If you have any feedback or a company you'd like us to COVID leave a comment or send an email to brewmarketshoworning brew.com Wake up tomorrow with the.

Ann Berry (26:58)

Morning Brew newsletter and tune in to Neil and Toby on Morning Brew Daily. We'll see you back here tomorrow, same time, same place.