The Great Rotation Is Coming: 2 Stocks Deemed AI "Losers" to Load Up On Today

Chaos has engulfed the software sector. Stocks in the sector are plummeting due to perceived immediate threats from AI start-ups like OpenAI and Anthropic, enabling enterprises to easily replicate existing solutions. It has not shown up in the financials yet, but the fear of disruption has Wall Street rushing for the exits and asking questions later.

Slow down. Breathe. These stocks are not going to go bankrupt tomorrow because of a new chatbot feature. Once this AI hype fades across the market, high-quality software stocks are going to start working again. Here are two cheap software stocks to buy for your portfolio right now, before they do.

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Website building uncertainty

Wix.com (NASDAQ: WIX) is down over 80% from its highs. Investors believe the website-building platform will be disrupted by artificial intelligence (AI) because it's so easy to use AI tools to build websites from scratch.

This argument does not seem strong to me for a few reasons. First, Wix is one of the AI website-building tools that has been a leader in this space for years, thanks to its generative design and prompt-based approach. There may be more competition in the future than in the past, but that does not mean Wix is destined to fail. It has already built a chatbot-style design tool and acquired an AI mobile application builder called Base44 that is growing like gangbusters, going from $0 in revenue to $100 million in annual recurring revenue (ARR) in less than a year.

Financially, Wix does not seem to be hurt by AI, at least not yet. Revenue grew 14% year over year last quarter, and free cash flow margins remained healthy. Management is taking advantage of its cheap share price to repurchase stock, removing close to a third of its shares outstanding through a Dutch tender offer. Wix traded at just 6x trailing free cash flow, which should make this buyback highly accretive, even though it was done at a slightly higher price than today.

Unless you think Wix is going out of business this year, the stock looks like a great buy for your portfolio today.

Engineering and design software powerhouse

A business out of the headlines when it comes to the AI race, and yet still in a brutal drawdown, is Autodesk (NASDAQ: ADSK). Autodesk is a leading software company that sells programs for engineers and construction workers to design and test projects in virtual worlds.

As with website building, investors fear that AI will disrupt Autodesk's products. However, these software programs are much more complicated than they appear. They utilize real physics simulations, integrate directly with building codes, and layer on communication and file transfer functionality across different parts of the build supply chain. What's more, Autodesk has been investing in AI simulation and design techniques for ages. This should help it build more valuable tools for customers, giving it pricing power when selling to engineers, architects, and construction companies.

Financial pain is not showing up for Autodesk yet. This AI risk is in narrative only. Revenue grew 18% year over year last year to $7.2 billion, with expectations for $8.1 billion or more in revenue this fiscal year and further operating margin expansion.

Right now, Autodesk stock trades at 18x its trailing free cash flow. While not as cheap as Wix, it should still be a solid performer for your portfolio going forward. The business has grown its revenue by 200% cumulatively in the last 10 years, with no signs of slowing down. All the cash it generates can be used to repurchase stock. Investors who buy Autodesk today and hold on for the long term will not be disappointed looking back 10 years from now.

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Autodesk and Wix.com. The Motley Fool has a disclosure policy.