Yimin X
Founder of YX Insights, Ex-FX/Rates Market Maker
Software valuations are at 10-year lows, with a forward PEG ratio of 1.43 that is cheaper than the S&P 500's, which looks enticing unless software is truly dead. The software ETF is at a key crossroads, still below a bearish trendline in place since October despite a 3% Friday gain; a direct breakout would likely complete the bottoming phase, though it could still pull back to form a fuller inverse head and shoulders. x.com x.comÂ
Software stocks may be quietly forming a base. The sector has held above its February low despite the broader selloff, with heavy volume clustering near recent lows that suggests accumulation. Software funds also drew net inflows over the past month while equities overall saw consistent outflows, an early sign of relative strength. x.comÂ
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
Software stocks trade at their lowest forward P/E ever, so every software company showing improving, let alone accelerating, earnings should fly. x.comÂ
The iShares Expanded Tech-Software ETF is an unappealing way to own software, even with a long-term bullish view on the sector. AOTS has outperformed it because its holdings are actually profitable and have higher revenue and earnings growth. x.comÂ
Institutions are massively accumulating software stocks for the long term, absorbing every new low while price sits at potential resistance. A $9 million-plus call sale at next month's $100 strike and VIX call buying show them hedging a possible rejection at prior highs. If resistance breaks, that buying could fuel the largest software rally ever seen; losing the $102.70 accumulation level would be the next step down. x.com x.com x.com x.comÂ
Software is heading for a renaissance as agentic AI transforms everything, and the software ETF IGV is consolidating ahead of a move higher. x.comÂ
The software selloff will last a while unless software companies invest to accelerate revenue growth, from 10% to 20-25% or from 20% to 30-40%, which will not be easy. Sentiment should change at some point. x.comÂ
The software selloff looks overdone, as AI seems to be creating dispersion rather than killing software. All 13 S&P 500 software companies that have reported so far beat EPS estimates, and software stocks are up about 40% from their April lows. x.comÂ
AppLovin looks tempting after a massive reset, with some of the strongest fundamentals on the market, in an elite club with Palantir and CrowdStrike. Its price is down 57% from the highs, back to 2024 levels, and its P/E has fallen from 70x to a record-low 24x. Growth has decelerated from priced-for-perfection levels, but it is still a money machine, software-disruption fears are cooling and the stock is consolidating in a long-term support zone. The bottom is likely close. x.com x.com x.comÂ
Security software is arguably more of an AI bubble than semiconductors. Firms are bid up to nosebleed multiples on moderate AI-related revenue acceleration while facing medium- to long-term risks from Microsoft, Google and the AI labs and a 10-year Treasury yield above 5%. Their forward P/Es rest on non-GAAP earnings that exclude large stock compensation. A reversal could come from results missing high buy-side bars, security share gains by Microsoft or Google, or AI lab security launches. x.com … Show more
Software stocks look poised to rebound after being deeply oversold, with the data turning bullish. Breadth across 41 software names flipped from under 5% to 82.5% above their 10-day averages in three weeks, oversold readings hit 90.1 and stress eased to 35.6. Models put the 3-day probability of a rise at 85% and the 20-day crash probability at just 6.5%, with six of nine models bullish and global liquidity supportive. Leaders include Oracle, AppLovin and Microsoft. x.com x.com x.com x.com x.com … Show more
