Capital One names two lagging IT stocks and no longer advises buying them
The status quo in the software development services market has been disrupted by neural networks
The race of artificial intelligence technologies continues, and two major players in the software market have started to fall behind, Capital One analyst Connor Murphy warned his clients. According to him, traditional collaborative software development platforms GitLab and Atlassian are gradually losing competition to services for automatic code generation using neural networks.
Details
Murphy downgraded shares of GitLab and Atlassian from "above market" (Overweight, meets buy recommendation) to Neutral (Equalweight) on July 16, citing slowing customer acquisition and declining average revenue per user, reports Barron's. The Capital One analyst believes that the growing popularity of AI code generation tools and corporations' desire to create software without using external services threatens Atlassian's and GitLab's business models.
"The factor entailing the disruption of the status quo in the industry is the growth of alternative solutions based on artificial intelligence and private code generation (customers' desire to create software without using external services - Oninvest). This could lead to lower earnings forecasts for next year and beyond," Capital One analyst explained his decision. - This more negative attitude, in its turn, may limit the growth potential of these companies' multiples".
Murphy cut GitLab's target price to $46 from $54, citing the rise of AI-enabled competitors and the loss of the company's unique advantages. GitLab is preparing to launch an Agent Platform that will allow users to plug in third-party AI tools. But a Capital One analyst is skeptical about the prospects of such a move and its impact on revenue.
He lowered his target on Atlassian shares to $211 from $241, citing a weak outlook for the current quarter.
What Wall Street thinks of GitLab and Atlassian
Wall Street analysts are generally positive on GitLab and Atlassian. According to FactSet, the average target price for GitLab shares is $62 per share, which implies a 46% upside from current levels. The consensus rating is Buy. The Target on Atlassian stock is $275 with a current price target of about $190. Most stock analysts also recommend the stock to buy (Overweight rating).
Context
Neural networks already write 20% to 30% of the code in some Microsoft projects, said the corporation's chief executive Satya Nadella in April 2025. Meta founder Mark Zuckerberg estimates that in 2026 at his holding company, "about half of development will be done by AI rather than humans - and beyond that, that share will only grow." Salesforce CEO Marc Benioff told interview Bloomberg in June that AI does up to 50 percent of the company's work.
This article was AI-translated and verified by a human editor
