Amid the sweeping wave of artificial intelligence, the U.S. stock software sector has recently faced significant selling pressure. However, Wall Street investment bank Wedbush holds a different view, believing the market is “overpricing a doomsday scenario” for the software industry, with related concerns being significantly exaggerated. In its latest report, the firm specifically named Microsoft (MSFT), Palantir Technologies (PLTR), CrowdStrike (CRWD), Snowflake (SNOW), and Salesforce (CRM), listing them as the five most worthy software stocks to hold in the current market environment.
Led by renowned technology analyst Dan Ives, the Wedbush team pointed out that while AI does pose some near-term pressure on traditional software business models, the market reaction has been excessive. The current sell-off appears to imply an extreme assumption that “the industry will be massively disrupted by AI,” which is not feasible in reality. Ives analyzed that enterprise customers are far more cautious than the market perceives when migrating to AI. Most companies are unwilling to place their core data on not-yet-fully-mature new platforms just to chase AI benefits, nor are they likely to easily abandon their existing software infrastructure, built with massive investments over decades. Therefore, while AI is a near-term headwind, the market’s pricing seems to reflect a “software apocalypse” judgment that is detached from reality.
Wedbush emphasized that the current large enterprise software ecosystem already contains trillions of data points, and emerging AI companies will find it difficult to fully take over such complex systems in terms of data hosting and enterprise-grade security in the short term. This suggests that AI is more likely to integrate into existing software platforms as “embedded tools” rather than completely replace them. Driven by AI anxiety, the software sector has experienced a historic sell-off. The IGV index, which measures the performance of the software industry, has declined significantly year-to-date, with substantial market capitalization evaporation in the sector, reflecting the market pricing for the worst-case scenario.
The report noted that the market’s core concern is that AI may erode the traditional “per-seat” SaaS model. Particularly after some AI companies launched tools that can automate high-value work, it sparked widespread investor panic about software business models. Meanwhile, the shift of corporate IT budgets toward the AI field has also heightened market worries about “software budgets being squeezed.” However, Wedbush believes that this budget reallocation will not lead to the obsolescence of traditional software; instead, it may strengthen the solid position of leading platforms.
At the specific stock level, Wedbush maintained an “Outperform” rating on all five aforementioned companies and elaborated on the bullish logic. The firm kept its $575 price target for Microsoft, believing its Azure cloud business and AI commercialization are accelerating. For Palantir, it maintained a $230 price target, pointing to strong demand for its AI platform in critical commercial and government missions. For Snowflake, it maintained a $270 price target, emphasizing its indispensable value as a “trusted middle layer” connecting enterprise data with external AI models. For Salesforce, it maintained a $375 price target, arguing that the market underestimates the moat formed by its high-quality data assets. In the cybersecurity space, it maintained a $600 price target for CrowdStrike, stressing that AI proliferation will amplify the importance of cybersecurity, and its AI-driven platform holds a solid position.
Ives concluded that while the software sector has recently become a “no-go zone” for many investors, the real winners are emerging in this so-called “software apocalypse.” The current extreme sentiment, in fact, creates a rare opportunity for long-term investors to position themselves.
