Software stocks have fallen sharply, with the iShares Expanded Tech-Software Sector ETF down over 22% as of February 3, officially entering bear market territory. This decline follows the release of Anthropic’s Claude Cowork, an advanced AI tool capable of executing software tasks autonomously, raising concerns about AI displacing jobs in the industry.
Analysts believe the sell-off is overstated, with several software companies showing promising potential for recovery. Notably, Datadog (NASDAQ: DDOG) has an average price target indicating a 61% upside, while Snowflake (NYSE: SNOW) boasts a projected upside of 63%. Microsoft (NASDAQ: MSFT) is also seen as a strong player with a projected 47% upside, despite its stock dropping over 23% in the last six months.
As of now, 30 out of 33 analysts rate Datadog as a buy, with similar confidence for Snowflake and Microsoft, suggesting that opportunities exist amidst the current turmoil in the software sector.
