Adobe (NASDAQ:ADBE) and GitLab (NASDAQ:GTLB) shares slipped in early trading on Tuesday as investment firm Mizuho said the market believes it is seeing a “severe negative impact” from artificial intelligence.
“ADBE sits at the intersection of creative software and generative AI, where we believe the potential for disruption is both the highest and the hardest to predict,” Miuzho analysts wrote in a note to clients. “The company has moved quickly to embed AI into its flagship products through Firefly, which is integrated into Creative Cloud applications such as Photoshop, Illustrator, and Premiere. ADBE’s early decision to train Firefly on licensed and rights-cleared datasets has given it an important defensibility angle, especially as enterprise customers remain deeply cautious about IP ownership and indemnification. While the company’s strategy appears to be resonating with large creative agencies and corporate buyers, the real test lies in whether Firefly can enable ADBE to broadly defend its turf while also capturing a decent portion of an expanded creative software [total addressable market].”
The analysts continued: “ADBE faces intensifying competition from strong challengers and a new wave of AI-native creative platforms. Tools such as Canva, which began as a citizen designer-focused solution, are embedding generative design capabilities that could erode ADBE’s dominance, particularly in lower-end creative use cases. Meanwhile, Figma (FIG) continues to attract many design-first communities that value collaboration and simplicity. At the same time, a growing roster of GenAI startups is also pushing into adjacent areas. Midjourney and Stability AI are redefining digital art and image generation, Runway is an emerging player in generative video, and companies like Pika Labs and Luma AI are experimenting with 3D modeling and immersive content. And just last week, OpenAI raised the bar in generative video and audio with the release of Sora 2, a model capable of simulating complex physical interactions while preserving cinematic fidelity and audio realism, further intensifying competition. The proliferation of these challengers clearly suggests that the creative software category is more open to fragmentation than infrastructure or productivity software, raising valid questions about ADBE’s long-term market share.”
Mizuho analysts have an Outperform rating on Adobe, but lowered their price target to $410 from $460.
For GitLab, Mizuho analysts downgraded the stock to Neutral from Outperform, citing several challenges in the near-to-medium term.
“We also note that our biggest concern about moving to the sidelines is that GTLB carries a relatively low multiple, and that overall we believe the risk/reward profile is balanced. On the fundamental front we specifically see: persistent uncertainty around whether AI will support or erode GTLB’s developer-heavy seat-based model; rising competitive pressure as GitHub and AI-native startups likely continue to outpace Duo’s adoption; a monetization outlook that could be less robust than management suggests (pressure on Premium SKU); and questions regarding whether GTLB’s new GTM strategy will deliver a better outcome,” the analysts wrote.