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 

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.com 

Software companies face a multi-year repricing because AI has removed the scarcity that made software valuable. For 20 years building software required engineers, letting SaaS firms charge monthly fees forever; when anyone can build a working product in a weekend with Claude, software stops being the moat. Atlassian is down 75%, HubSpot 69% and Figma 86%, and layoffs show headcount no longer scales with output. Survivors will be those with distribution, data and trust underneath. 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 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 

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.com 

Adobe, Salesforce and ServiceNow, the supposed AI losers, offer the best long-term value in this market, per JPMorgan. The fear is that AI tools destroy incumbent software economics, but multiples already price a catastrophic scenario, whether or not the collapse happens. This is the setup in which dead stocks became the best performers of the next cycle. x.com 

Microsoft and software stocks broadly still look expensive, because AI will get exponentially better over the next two years and the market may reset software valuations much lower. Software valuations have always been ludicrous, and heavy stock-based compensation behind many software revenues is widely ignored. Winners will emerge, but picking them is not worth trying. x.com  x.com 

Adobe's problem is no longer valuation but bad sentiment toward software companies. It fell after hours in sympathy with ServiceNow despite trading around 15x trailing and 10x forward earnings while still growing 10%, and none of that matters right now. To recover, Adobe needs more collaborative projects and joint events with leading AI companies so it is seen as definitively part of the future. x.com 

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.com