FidelityNow: Mark Schmehl on U.S. software

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Good afternoon, everybody.

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As we all know these days, software has been in the headlines

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as to the most disrupted section of the AI trade.

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We thought we would just give you a quick update on what I'm thinking and how

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I think this will impact software and broadly technology.

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First of all, it's clearly going to have a huge impact on software, on

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every industry, everywhere.

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The question is, what is that impact? And the market right now is

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struggling to define winners and losers and it's really way too early

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to make that call.

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And some of the moves we've seen have just sort of been panicky and

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not very logical. For example, trucking going down yesterday.

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I mean, you're still going to need trucking. It's not going to be disarmed

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by AI. So we're just seeing a lot of crashing around in the

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markets. As the market tries to grip with what is going to

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be a massive disruption wave.

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So I think it is very clear that software is the pointy end of the

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spear and will be impacted first, and is currently being impacted massively,

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but the moves don't make sense. And so our job is to sort of look through the

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rubble and figure out which of these companies really

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will get disrupted and which won't, and where do I want to step in and buy

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them, and which ones don't I want, and I mean, that's active management.

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That's what we do for a living. So there are broadly speaking a lot of

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opportunities right now. Whenever there's massive change, there's

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massive opportunity.

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And for those of us on the ground doing the work, this is where you make,

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you know, next year's money.

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And so I'm finding lots of great companies that

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I don't believe will be disrupted if anything, they may benefit from what's

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currently happening that are currently being sold with everything else, and

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that's a function one of

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the way markets are constructed these days, there's a lot of passive ETFs that

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just have baskets of stocks in them and folks like sell software

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and it's a basket of a hundred names.

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They don't really know what's in it.

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And so everything goes down, even though not everything should go down.

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So what you're seeing is you're saying a lot of inefficiency in

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this market that we are going to be taking advantage of and are taking

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advantage as we speak and sort of by the time I start doing these videos,

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the move is usually over. So maybe we've seen the worst of it, but I

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think that the way to think about this is, this is a big long-

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term story and will have very big long-term impacts

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that we cannot quantify in the short-term.

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And so the overreaction in the shorter term is an opportunity and

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the maybe the underreaction to what maybe the long-term will

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also be an opportunity. And so we're grappling with both as we speak.

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So basically. We're getting a lot of chop, there's a lot

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of unknowns and there are a lot of people making mistakes right now.

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And my job is to try and make fewer mistakes than my peers and

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find the ones that we want to own.

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That's essentially what we're doing and what I'm doing,

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and I will keep doing. And so that's just a brief update on what's happening in

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software these days.