Zenolytics
Founder of Zenolytics, Portfolio Manager at T11 Capital
Software stocks are becoming the next leadership group, as the functional layer of AI turns hardware investment into real-world outcomes. Software is now leading hyperscalers and crypto, a sign the market is correcting its mispricing of the AI timeline. Those outcomes are still in the first inning, and significant acceleration is expected. x.com
Software stocks have a long way to run because investors remain offsides, still crowded into semis. Goldman Sachs prime brokerage data, shared by @zerohedge, show client length in semis and software trading as mirror images, an inverse that went into overdrive in the second half of last year on the AI enablers-versus-disrupted narrative before breaking in recent months. Software was left for dead at the April lows while most investors were busy chasing semis. x.com x.com
Software stocks may benefit from the AI displacement trade's complete reversal through 2026: instead of AI supposedly displacing traditional software companies, software companies could potentially displace the AI trade itself. x.com
Anthropic's compute commitments point to future revenue for Alphabet, Amazon, Microsoft, Broadcom and Nvidia. Its S-1 reports 14-fold revenue growth, positive second-quarter 2026 EBIT and more than $600 billion committed to compute through 2045. The AI trade is alive and well, more than expected, provided demand keeps pace with those commitments. x.com
The rally in US software stocks is really long in the tooth, if anyone is still left who believes AI alternatives run by one- or two-person shops can cannibalize a lot of software. x.com
Software looks like a group that can lead the market higher, with many names from Palantir and ServiceNow to Zeta and MongoDB moving from late Stage 4 or Stage 1 into early Stage 2 uptrends. Sentiment is at an all-time low on fears that AI agents and chatbots will replace SaaS. AI will disrupt some areas, but many software businesses are using it to grow revenue, ship faster and expand operating leverage, and will thrive. The charts will separate survivors from the dead. x.com x.com
Hyperscalers' forward P/E has contracted 20% even as estimates ramped, making it rare to see things get much worse. Rising GPU rents and new lows in availability make the AI fears a fade; hyperscalers should lead. The next two weeks will be gut-wrenching amid the OpenAI raise, Anthropic S-1, Fed, midterms and mutual-fund selling into year-end, but that is the time to buy. x.com
Hardware is squeezing software as enterprises redirect budgets to scarce servers, GPUs and storage, favoring semiconductors over software. IBM's Q2 revenue of $17.2B missed its $17.9B target, and its CEO said clients moved software and IT consulting budgets to secure rising-priced hardware. Microsoft, ServiceNow and Salesforce face near-term pressure while Dell and Micron benefit. Aehr Test's beat and raised guidance counter claims the chip cycle is dead. x.com
SaaS will have its time in the sun again, and now, while it is still hated, is the time to pick favorites and build positions. Bearish sector narratives don't last forever, and the view that all SaaS is being disrupted should ease somewhat this summer, though multiples may not return to prior levels. Some SaaS names have little moat against Anthropic and peers, but many, especially cybersecurity and Palantir, are strengthened by the agentic push. x.com x.com x.com
Software stocks are set to rip higher on the news shared in the post. x.com
Software is having its best stretch, having come back alive rather than collapsing. The software doomsday story is simplistic, because people exaggerate change into extinction and assume new products drive old ones to zero. Creation and disappearance aren't instant; AI won't end software, it will only reorder what we thought mattered. Investors should focus on how existing valuation methods break down, not on easy logic. x.com
Software stocks probably have a floor as results challenge fears that AI agents will displace them. Since the June 22 momentum unwind, IGV is up 25% and the SOX index down 22%. Atlassian and Salesforce jumped on solid results, plus an Anthropic deal for Salesforce, and possible Silver Lake interest lifted Workday. A new bullish twist says agents will use software tools 10-100x more than humans. Whether fundamentals back the rally is still open; a likely Fed hike and weak September are risks. … Show more
