Options selling with Christian
Growth Investor, Options Selling, Creator of Stock Catalysts
Software stocks face customers shifting budgets to AI infrastructure and cybersecurity while vendors spend more on tokens than planned. IBM said this last week and fell almost 30% in one day, and Pegasystems said the same this morning. That is good reason to be nervous holding ServiceNow into tonight's earnings, though it could surprise to the upside if it avoids the issue. Palantir is the only software name worth owning right now. x.comÂ
Software companies are going to spend far more on AI tokens than they expected, which will eat into their margins. That makes a post-earnings turnaround unlikely for ServiceNow, which per @crisronalssi has dropped after earnings four straight quarters, and weighs on Intuit, Workday, HubSpot, Salesforce and Adobe too. x.comÂ
Palantir is finally getting the premium it deserves as software returns to favor, with software firms among the biggest buyers of hyperscaler compute. AWS grew 37%, Google Cloud accelerated to 82% and Azure grew 43%, with cloud growth surprising to the upside across all of them; beyond frontier model companies, software is what runs on these platforms. The same Palantir quarter reported last time could have sent the stock down. x.comÂ
Software's relative strength and sound finances make institutional rotation from semis plausible. It could lead while semis consolidate, despite slow growth at some firms; the market rewards cash flow, healthy balance sheets and manageable debt. Salesforce, ServiceNow, Palantir, Shopify and Workday hold up; SAP's cloud and AI shift, Instacart's massive 10-month base, Veeva's massive five-year base and Atlassian's Stage 2 strength add to the case. Semis may still rally; the view can change. x.com … Show more
ServiceNow's unexpected expense surge makes its rich valuation more vulnerable in a struggling software sector. Revenue rose 21%, but spending drove an EPS miss and one quarter of guided cRPO deceleration; wider market conditions could hurt near term. The 20% selloff looks excessive, and few software companies should benefit as much from AI. Management could deliver over 3-5 years, though the stock is only close to a buy again now; below $100 looks good for the long term. x.com x.com x.com x.comÂ
AI is forcing a repricing of the enterprise software business model, and for ServiceNow and SAP the reset is not finished. Claude Managed Agents eased production AI deployment, ServiceNow's AI bundling raised monetization questions, and SAP warned of short-term pain like its cloud-migration margin squeeze. Multiples compress before new economics are understood, and most software still trades at a premium on GAAP P/E and EV/FCF ex-stock comp. Workday at 1.7x revenue hints at a floor. x.comÂ
The 'SaaSpocalypse' narrative is wrong because AI makes replacing enterprise software more expensive, not cheaper, leaving beaten-down SaaS stocks at once-in-a-lifetime entry levels. Replicating ServiceNow would take some 40,000 engineers to match 20 years of code, and even AI coding would raise costs, since tokens are not free and model labs lack the capacity to be enterprises' database layer. LLMs are pattern recognizers that can fail catastrophically on new problems. x.com x.comÂ
Zeta Global, ServiceNow, Datadog and CrowdStrike look increasingly attractive among software names as AI disrupts applications: businesses with proprietary data that build on AI and deliver intelligence and measurable outcomes could win. Cybersecurity valuations remain a concern. x.comÂ
Palantir looks set up well into its earnings report because investors are rewarding software companies that beat estimates, as Twilio and Atlassian just showed. Its 20% pullback in 2026 is milder than most software names. It is a speculative bet on the print. x.comÂ
Software stocks are not a buy, and the warning signs are everywhere. Per Laura Bratton's report, ServiceNow has blown through its full-year budget for Anthropic's AI coding tools within the first few months of 2026, as Uber's CTO said his company had too; ServiceNow's CIO called it a really hard problem. x.com x.comÂ
Software stocks are bouncing back as investors realize companies like Microsoft and Oracle are becoming essential AI infrastructure rather than being replaced by AI. The IGV software ETF jumped about 13% last week, suggesting the worst panic selling may be over, and Bank of America sees a bottom forming. Even the hardest-hit names, Salesforce and Palo Alto Networks, are showing signs of life as investors move from fear back to quality. The sector is not completely out of the woods yet. x.comÂ
ServiceNow, Palantir, Microsoft and Zeta are integrating AI and growing fast, so the AI-scare valuation reset is an entry point. Fears that AI will eat SaaS, plus capex questions, compressed valuations, yet ServiceNow's Q1 revenue rose 22% with guidance raised, Microsoft's Azure grew 40%, Zeta's revenue rose 50% with high-30s growth guided, and Palantir guides about 61% growth with US commercial over 115%. AI is a tailwind for platforms that orchestrate it, and they deliver Rule of 40+ at scale. … Show more
