Software Stocks Jump as Wall Street Rejects AI Doomsday Scenario

Is the software apocalypse "overblown," or is AI really poised to steal its lunch? Wall Street is split, but some analysts are betting that software's not dead yet, despite the rise of artificial intelligence.

AI Threat to Software: Overblown or Existential?

Wall Street Weighs In

Software stocks experienced a mixed Monday as Wall Street analysts challenged investor fears of AI disrupting the sector. DA Davidson’s Gil Luria upgraded Oracle (ORCL) to Buy, citing optimism about its OpenAI deal. Luria stated that "Software isn’t dead," arguing companies will continue paying for Oracle’s products.

Oracle shares jumped 10% following the upgrade. The Tech-Software Sector ETF (IGV), including Microsoft (MSFT) and Palantir (PLTR), rose 3% on Monday.

The "Armageddon" Narrative

Wedbush Securities’ Dan Ives called the recent software “Armageddon” narrative “overblown," adding Salesforce (CRM) and ServiceNow (NOW) to the firm’s AI 30 List. Ives noted that customers are unlikely to risk their data to quickly adopt AI.

Despite the positive sentiment, Salesforce is down roughly 26% year-to-date, and ServiceNow has fallen 32%. Monday.com's (MNDY) leadership also acknowledged customers are figuring out how to best leverage AI with existing systems.

Co-existence or Pricing Power Struggle?

Victoria Fernandez, chief market strategist at Crossmark Global Investments, believes AI and software companies can "co-exist on some level." However, she questions how much pricing power these companies will retain. Fernandez suggests cautiously exploring some of these stocks, especially those with strong balance sheets, given their significant pullbacks.