Dan Ives Highlights Record Disconnection in Software Stock Sell-Off Since the 1990s and Shares His Bullish Outlook

Key Points

• Dan Ives argues the software sell-off isn’t justified by business fundamentals.

• Microsoft, ServiceNow, and Salesforce are showing strong growth in AI-driven products.

• AI infrastructure spending might pressure near-term earnings but offer long-term advantages.

Software stocks have struggled in 2023, with Microsoft (NASDAQ: MSFT), Salesforce (NYSE: CRM), and ServiceNow (NYSE: NOW) down as much as 29% year to date. Analyst Dan Ives highlighted this sell-off as one of the most disconnected from business fundamentals since the late 1990s.

Despite performance declines, Microsoft reported an 18% year-over-year revenue increase with over 30 million paid Microsoft 365 Copilot seats. ServiceNow saw subscription revenue growth of 23%, closing 123 deals over $1 million, while Salesforce posted a revenue increase of 14%, with $34 billion in remaining performance obligations and a record 98 deals exceeding $1 million.

Microsoft invested $41 billion in capital expenditures last quarter for AI infrastructure, raising concerns about near-term earnings pressure. However, analysts maintain long-term growth estimates, suggesting the recent downturn may present a buying opportunity in software stocks.