Key Points
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Software stocks have fallen into a bear market, down 26% from September highs, largely due to AI-related concerns.
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Nvidia CEO Jensen Huang criticized market reactions as “illogical,” stating fears of AI replacing existing software are unfounded.
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Microsoft’s median target price of $600 suggests 47% upside from its current price of $409, bolstered by growth in its generative AI copilots and cloud market share.
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Datadog reports strong growth, with revenue rising 29% to $953 million and a median target price of $180, implying 42% upside from current levels.
The S&P North American Technology Software Index has entered bear market territory, falling 26% from its all-time peak in September, with AI developments causing investor concerns over diminished demand for traditional software. Despite the downturn, investors are optimistic about Microsoft (NASDAQ: MSFT) and Datadog (NASDAQ: DDOG), both seen as undervalued, with analysts projecting major upside in their stock prices.
Microsoft’s recent performance reflects a 21% market share in cloud services, up from 20%, driven by its Azure platform’s capabilities, while Datadog continues to lead in observability software, essential for AI applications. The company reported a 29% increase in revenue for the most recent quarter, emphasizing the growing demand in the sector.
