Image source: Getty Images
FTSE tech stocks such as London Stock Exchange Group (LSE: LSEG) or ‘LSEG’, RELX (LSE: REL), and Rightmove have been absolutely hammered recently. In the blink of an eye, years of share price gains have been wiped out. Both LSEG and Rightmove are back at 2019 levels and valuations have fallen to multi-year lows.
Could there be a huge opportunity for value investors here? Let’s discuss.
Are AI fears overblown?
There’s a school of thought in the market that AI is going to destroy software/internet businesses. That’s why these shares have tanked. The theory is that companies and consumers will be able to create their own applications with AI and therefore won’t require the services of companies like LSEG and RELX (both of which provide data) or Rightmove (which offers a property search portal).
Now, there’s no doubt that AI adds uncertainty here. But could the fears be overblown?
I think so. While some software companies have easily replicable solutions and are at risk of AI disruption, this is not true of every company.
The case for LSEG
Zooming in on LSEG, which is down 40% from its highs, I think it could be more immune to AI than the market is giving it credit for.
For a start, it sells financial data to banks and investment managers. These kinds of companies (which have deeply embedded workflows and are generally slow to change) depend on highly accurate data so they’re not going to blindly trust AI.
Meanwhile, LSEG has partnerships with a range of data/AI companies including Databricks, Snowflake, Anthropic, and OpenAI. So, there should be plenty of additional revenue opportunities in the years ahead.
It’s worth pointing out that industry automation is a risk. This could lead to fewer seats/licenses that the firm can charge for.
The stock is down 40% and currently trading on a forward-looking price-to-earnings (P/E) ratio of 16. I like the risk/reward proposition and think it’s worth a closer look. Analysts at UBS agree – they currently have a Buy rating and a price target of 11,000p.
A look at RELX
Turning to RELX, which provides legal, scientific, and financial risk data and related solutions, the situation is a bit more complex. That’s because there are some parts of its business that could be disrupted by AI.
An example is its Lexis+ platform, which enables lawyers to draft briefs. Recently, Anthropic released some legal plugins that could potentially replace this.
However, RELX’s risk division (which generates a large chunk of its revenues) looks more immune to AI. This is because it relies on massive, private databases of identity and fraud records.
So, I don’t see this business being wiped out by AI. I think it could be worthy of further research after its recent share price fall as the P/E ratio has fallen to 16 (low for a data company).
What about Rightmove?
As for Rightmove, some people believe that in the future, Britons won’t use this platform and will instead ask ChatGPT or AI agents for links to property for sale/rent. This scenario is a possibility but it’s far from guaranteed.
Personally, I reckon a lot of people will continue to use the platform (I will) because of its vast property selection. So, I think the stock could be worth a look while it’s down.
