By Dan Romanoff, CPA
Publication Date: 2026-03-09 00:00:00
The pace of change around artificial intelligence will undoubtedly impact software companies. In our view, the future of software is less clear today than it was a year ago, which informs us Trench assessment Downgrades. We no longer believe that software companies are almost certain to generate excess returns over the next decade. Instead, we think it is likely, and we are even less confident, that it will continue beyond the next decade.
We continually re-evaluate our moat ratings and assumptions and believe that the current opacity can be clarified as the AI era evolves. This leaves open the possibility of raising the moat ratings of some of the companies we recently downgraded.
Our bottom Fair Value Estimates are consistent with a reduction in the moat duration horizon from 20 to 10 years. Shorter Stage 2 maturities within our discounted cash flow models (typically now five years, up from 10 years previously), with lower growth now expected in Stage 2, lower our fair value estimates. Beyond the…
