AI is crushing these once-reliable tech stocks. Are investors missing the point?

By Christine Ji

FactSet and Gartner are among the S&P 500's worst performers this year - but some on Wall Street see resilient and sticky businesses that can adapt to AI

Both FactSet and Gartner shares have historically outperformed the S&P 500, but concerns over artificial intelligence have rattled investors.

A previous version of this story included an inaccurate price target for FactSet's stock.

It's been a tough year for information-services companies FactSet Research Systems and Gartner.

Shares of Gartner (IT), which sells information-technology research, are down 52% since the beginning of the year, making them the fourth-worst performer in the S&P 500 index SPX over that time. FactSet's stock (FDS) hasn't fared much better, falling 39% on the year to rank as the 12th-worst performer in the index.

Artificial intelligence is the main reason for the sharp declines, as investors fear that large language models will bring deep research capabilities that would hurt demand for FactSet's and Gartner's subscription offerings. It's a similar narrative to the one that has plagued big software names such as Salesforce (CRM) and Adobe (ADBE) this year.

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But the selloff has been unwarranted, in the eyes of some analysts.

It's worth noting that the stocks weren't always laggards. In the 10-year period ending Dec. 31, 2024, FactSet's stock beat the S&P 500 - returning an annualized 13%, compared to the index's 11%. Gartner's stock returned almost 20% annually over the same period, according to FactSet data.

"Some investors may have the view that because of AI tools and features in the future, the number of people being employed at financial-services firms is going to decline significantly," Kelsey Zhu, analyst at Autonomous Research, told MarketWatch. While FactSet doesn't sell that many of its workstations on a per-seat basis anymore thanks to its shift toward a more enterprise-based sales model, Zhu noted that if headcount within the broader financial-services industry were to contract, that could pressure FactSet's average sales value.

Both FactSet and Gartner have faced a difficult selling environment this year, as deals have taken longer to close and clients have cut back their budgets, William Blair's Andrew Nicholas wrote in an October note. And although Gartner beat third-quarter revenue and earnings expectations in November, the company's contract value, or the annualized value of its subscription contracts, came in lower than expected.

But bulls say investors are overlooking how these companies have competitive moats, as well as their own AI initiatives that could pay off.

Zhu believes the negative sentiment around FactSet comes from a misunderstanding of the company's complex database, which she thinks is difficult for an AI startup to replicate. FactSet collects and refines data from official filings, news, sell-side research and fixed-income pricing, creating a high barrier for entry for new AI entrants. In fact, FactSet could actually see a near-term boost to its business by selling its data to AI companies, Zhu said. She rates the stock a buy with a $390 target price.

FactSet has already been utilizing AI in its business. On its September earnings call, the company shared that its AI tools were a "pivotal" factor in 35% of its renewals.

While Nicholas only rates FactSet's stock at market perform, he's bullish on Gartner shares, writing in a November note that an "improved outlook" for its insights and consulting business will lead to increasing revenue growth.

Gartner management conveyed on their November earnings call that AI disruption is "extremely small," and that clients have actually utilized the company to assist with their own AI strategies. Gartner has also deployed AI tools internally to increase the productivity of its analysts and speed up publishing time.

Nicholas praised the company's cost discipline, which has allowed Gartner to protect margins despite weaker sales.

However, in order to shake off its recent stock decline, Gartner will need to show increasing contract-value growth going forward, Nicholas wrote. His bull case depends on the company reaching double-digit contract-value growth over the next 24 months, up from 3% last quarter.

For FactSet, investors will want more details about the company's margin guidance when it reports fiscal 2026 first-quarter earnings on Dec. 18. Bears worry that as FactSet makes significant infrastructure and product investments to integrate AI, margins will contract, according to Zhu.

As such, FactSet "will need to clarify exactly what they're doing with their AI investments," Zhu said. Further detail around the company's AI strategy, and how AI developments will keep the company competitive in the future, could be helpful for investors, she added.

Also read: These AI 'loser' stocks were left for dead. Now it might be their turn to rally.

-Christine Ji

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12-15-25 1153ET