US Equities Rally Boosts Enterprise Software Shares Amid Easing Interest-Rate Expectations

The US equity market rally is boosting enterprise software shares as investors reassess the sector's exposure to AI and react to easing interest-rate expectations.

Major beneficiaries include Microsoft and Salesforce, whose stocks have surpassed prior targets after recent earnings reports and improving sentiment around their business outlooks.

Microsoft's price target has risen to $550 from $500, while Salesforce's target is now at $290 from $250. Both companies' shares have gained significantly since reporting earnings, with Microsoft up 25% since July 29 and Salesforce rallying 29% since August 26.

The sector's rebound is attributed to signs that AI is not disintermediating established software businesses. Microsoft's spending discipline around AI infrastructure and strong traction for its Microsoft 365 Copilot are contributing factors, while Salesforce's Dreamforce conference in two weeks is generating new contract expectations.