These Top Tech Stocks Can Stand Up to AI Risks

• Morningstar defines moats as competitive advantages allowing companies to sustain excess returns (ROIC vs. WACC) for 0-10 years (narrow) or 10-20 years (wide).
• AI is expected to pressure 'app layer' economics due to replicability but will increase demand for 'infrastructure layer' services like cybersecurity.
• Resilient sectors include cybersecurity (Cloudflare, CrowdStrike), design software (Synopsys, Cadence), and financial infrastructure/data (Moody's, S&P Global), often characterized by high workflow complexity, network effects, or regulatory moats.
• Many software stocks have been oversold, creating opportunities in firms with strong moats, even if some have seen moat downgrades.

Morningstar analysts investigated 132 companies for AI disruption and concluded it's not a universal destroyer. They recommend investors look for undervalued companies with enduring competitive advantages (moats) in resilient sectors like cybersecurity, design software, and financial infrastructure, despite recent market sell-offs.