2 of the worst-performing stocks in the entire S&P 500 this year are sitting in a sector I've spent five years writing about… and some of my biggest winners have come from.
Because no sector has had a worse start to 2026 than enterprise software…
A combination of high multiples, and the boom in AI-assisted coding solutions has put the entire sector under threat.
The selloff is largely down to a single key narrative - why pay a software subscription when an AI agent can do the same job cheaper?
It’s a completely reasonable position… but one that’s overly simplistic
I've gone through the wreckage and looked at 2 names I think the market has mispriced.
Both are down more than 40% since January.
Each has a legitimate bear case… but they also has something the bear case tends to ignore.
The first is FICO
FICO's 60% collapse from its peak is almost entirely driven by one fear… that regulators will cap what FICO can charge lenders for credit scores.
But FICO's moat is statutory, not behavioural.
GSE mortgage origination legally requires a credit score, and FICO remains the only model with sufficient lender adoption and historical trust across the industry.
AI cannot disrupt this because AI-driven credit models are themselves subject to the same FHFA regulatory approval process. Plus alternative scoring models like VantageScore have been approved for years yet still haven't meaningfully dented FICO's market position.
So the real bear case is purely a political risk… and political risks have a habit of taking longer to materialise than the market prices in… or not materialising at all.
At 22x forward earnings with 47% operating margins, you're paying a reasonable price for a business that cannot be disrupted by AI agents or competitor software.
Then we have ServiceNow
ServiceNow is legitimately a seat-based model and does face real margin compression.
But ServiceNow's actual product is workflow orchestration. Think of it like the plumbing that connects different software systems inside a large company and makes sure tasks flow between them in the right order.
As AI agents proliferate inside organisations, something needs to manage them… route them… like making sure the AI handling HR requests isn't stepping on the AI handling finance approvals. ServiceNow is already positioned to be that layer.
So the more AI agents a company deploys, the more they need something to coordinate them. Meaning that the very trend everyone assumes kills ServiceNow may end up expanding its role. A 97% renewal rate demonstrates this.
The seat-based pricing model will need to evolve. But the underlying infrastructure is becoming more load-bearing, not less.
At 20x forward earnings, it's not bargain basement pricing yet — but it's the seat-based name with the strongest argument that AI is an enabler… rather than a killer
Like all good investments, both of these have been massively stress tested in the past few months, but I’d be willing to bet money that both of these stocks will be higher in 12 months time.
For more info on investing in the age of AI - grab a copy of The AI Stock Investor here
Oliver