Software Stocks Plunge Amid AI Fears, But Analyst Sees Buying Opportunity
Top tech analyst Dan Ives has described the recent sell-off in software stocks as the most disconnected from business fundamentals since the late 1990s.
The sell-off has seen shares of Microsoft (MSFT), Salesforce (CRM), and ServiceNow (NOW) underperform the broader market, down by up to 29% year-to-date.
However, Ives remains bullish on these stocks, citing strong fundamentals that support his view. Recent earnings results from Microsoft, ServiceNow, and Salesforce have validated this optimism, with all three companies reporting growth in revenue and subscription rates.
Microsoft's Azure enterprise cloud platform and paid Microsoft 365 Copilot seats are driving surging demand, while ServiceNow's workflow automation business is seeing high growth rates. Salesforce has also reported a 14% year-over-year increase in first-quarter revenue, with momentum building in AI-related products.
Risks to these companies include potential headwinds from increased investment in AI infrastructure and the possibility of reduced software license sales as AI agents become more capable. Nevertheless, analysts remain confident in their long-term earnings growth estimates for these stocks.