Software stocks mostly rebounded on Monday as Wall Street analysts pushed back against growing investor fears that artificial intelligence could disrupt the sector’s business models.
Oracle (ORCL) shares jumped 10% after DA Davidson’s Gil Luria upgraded the stock to Buy from Neutral, citing optimism about the company’s OpenAI deal and pushing back against fears that AI would hurt its software business.
“Software isn’t dead,” Luria said in a note. “We believe companies will continue to pay for Oracle’s products and that they will not be vibe coded away,”
Oracle shares are down roughly 20% year to date as the broader industry has taken a hit.
The Tech-Software Sector ETF (IGV), which also includes heavyweights like Microsoft (MSFT), Palantir (PLTR), is down 20% year-to-date over fears that AI will take over tasks traditionally handled by enterprise software and disrupt their revenue models. On Monday it was up 3%.
Over the weekend, Wedbush Securities’ senior equity research analyst Dan Ives added Salesforce (CRM) and ServiceNow (NOW) to the firm’s AI 30 List, calling the recent software “Armageddon” narrative “overblown” in a note.
Salesforce is down roughly 26% year-to-date while ServiceNow has fallen 32%.
“We believe the market is baking in a doomsday scenario for software companies in the near-term, which we believe is extremely overblown,” Ives wrote on Sunday, adding that customers are unlikely to risk their data to accelerate AI adoption until migration projects become less complex and risky.
The sentiment was echoed by Monday.com’s (MNDY) leadership during the company’s earnings call. The stock plunged 20% following a weaker-than-expected revenue forecast for the current quarter and full year.
Management noted that customers still like their products and are trying to figure out the best way to leverage the technology.
“For them, the best way to leverage that technology is use already systems they’re using before where they have most of the data and the context and the workflows,” Eran Zinman, Monday.com co-founder and co-CEO, said during the earnings call Monday morning.
Victoria Fernandez, Crossmark Global Investments chief market strategist, said AI and software companies can “co-exist on some level, but the question is how much pricing power gets put in these companies.”
“I do think you can dip your toe in the water on some of these that have had such significant pullbacks, and such strong balance sheets,” she added.
Ines Ferre is a senior business reporter for Yahoo Finance. Follow her on X at @ines_ferre.
