Ives: Software Sell-Off Overdone as Giants Post Strong Earnings
Top tech analyst Dan Ives says the recent sell-off in software stocks is overdone and compares it to the late 1990s. He believes that despite concerns about competition from artificial intelligence (AI), companies like Microsoft, ServiceNow, and Salesforce have strong business fundamentals.
The three software giants reported strong growth in their latest earnings reports, with Microsoft's revenue up 18% year-over-year, ServiceNow's subscription revenue growing at a high rate of 23%, and Salesforce beating analyst estimates for the second quarter in a row. The companies are seeing momentum in AI-related products, which is validating Ives' view that software is essential to the AI build-out.
However, there are some risks to watch out for, including heavy spending on AI infrastructure by Microsoft, which could pressure near-term earnings. Additionally, as AI agents become more capable of completing complex tasks, they may reduce the need for companies to purchase additional software licenses, potentially pressuring revenue growth.