Growth Stocks Are Getting Crushed - Here's What You Need to Know

Daniel Pronk•Feb 14, 2026

Summary

Daniel observes a significant 'weirdness' in the market where the S&P 500 remains at all-time highs while many individual stocks are in deep corrections. He attributes this to a 99th percentile dispersion event, the likes of which haven't been seen since the dot-com bubble. Investors are rotating out of software and growth sectors into defensive stocks like Walmart, Costco, and Pepsi. Daniel finds this ironic because these 'safe' stocks are trading at historically high valuations despite low growth, making them arguably riskier than the growth stocks being sold.

The main driver for this shift is a widespread fear of Artificial Intelligence (AI) disrupting software business models. Daniel notes that the market is currently selling anything with even a slight narrative of being at risk, regardless of fundamental strength. He emphasizes that while some legacy software is vulnerable, companies with 'proprietary data' and physical distribution networks have moats that AI cannot easily replicate. He urges investors to be highly selective, auditing each company's vulnerability to being replaced by AI-generated code.

Walmart (WMT): Daniel views the stock as extremely expensive at a 46.6 P/E ratio given its modest 5% annual growth. He argues that the rotation into Walmart as a 'safe haven' is ironic because the high valuation makes it a risky bet. He notes that the company's valuation score is 'deeply red' on his research tools.

Costco (COST): Daniel notes that Costco's valuation is very high with a price-to-earnings ratio of 54.5. He acknowledges that the company is growing faster than Walmart, with 15.6% earnings growth since 2020. However, he maintains that the current price is still extremely high for the growth provided.

Pepsi (PEP): Daniel highlights that Pepsi is selling for a 25.6 P/E ratio despite revenue compounding at only 1.7% recently. He expresses concern that sales volume has been declining since 2022, with revenue growth relying solely on price increases. He views the stock's recent 20% rally as disconnected from its stagnant business fundamentals.

Constellation Software (CSU): Daniel currently holds a 7% position in the Constellation Software family but is not increasing it to his previously stated 25% target yet. He explains that while he believes the company will benefit from AI, the overall future of the software industry is more uncertain than it was three years ago. He remains bullish on their ability to use proprietary data to maintain a competitive advantage.

Adobe (ADBE): Daniel is no longer buying Adobe even though the price has fallen below his 2022 purchase level. He believes Adobe is at high risk of disruption from AI-generated video and image tools which could shrink its total addressable market. He prefers to stay cautious as AI content generation technology improves rapidly.

Meta (META): Daniel is very bullish on Meta because it is successfully integrating AI to automate ad video creation. He mentions a $10 billion run rate for this new revenue stream and believes it expands Meta's moat. He argues that Meta’s heavy AI investments will result in a strong return on investment.

S&P Global (SPGI): Daniel defends S&P Global against AI fears, stating that its moat is much deeper than the market realizes. He explains that the company sits on a massive amount of proprietary data that AI cannot easily replicate or standardize. He suggests the recent sell-off in the stock is a result of a misguided market narrative.

Summary

Mentioned Stocks