terminal value

The software sector’s sharp sell-off is driven by AI disruption fears, impacting long-term valuations. This downturn highlights the importance of “terminal value” – a company’s perceived future worth. While near-term profits remain stable, AI’s potential to reshape future earnings power has shaken investor confidence. Changes in terminal value assumptions significantly influence stock prices more than short-term projections, prompting a re-evaluation of whether current market apprehension is justified or overblown.