Software gets relief as AI trade recalibrates
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With investors on edge over who will thrive — and who could lose — in the coming AI economy, a pair of stock reactions Thursday suggest a tentative recalibration.
The big picture: The AI trade is splitting in two. Infrastructure must clear impossibly high bars. Software is getting some room to prove it can turn AI into durable revenue. The feared "SaaSpocalypse" hasn't materialized — but neither has unquestioned growth.
Catch up quick: Nvidia, which makes the chips powering AI, reported blockbuster earnings Wednesday. Even that wasn't enough: the stock fell over 5% Thursday.
- Salesforce — battered by AI anxiety for much of the past year — eased fears that AI will decimate traditional software. Shares rose 4%.
"This is not our first SaaSpocalypse," Salesforce CEO Marc Benioff said on Wednesday's earnings call, recalling similar fears in 2020. "We made it through that… and we're going to make it through this one as well."
Zoom in: Salesforce didn't blow the doors off with Q4 results, but did give investors a better-than-expected forecast for long-term revenue. Its Agentforce AI product generated $800 million in recurring revenue in the quarter, up from $500 million previously.
- "Agentic AI is a tailwind for our business," Benioff said in a statement.
On the flip side is Nvidia. It's stock drop wasn't about a miss. It was about an increasingly high bar to impress investors. Infrastructure is already priced for acceleration.
Between the lines: Thursday's moves reflect a broader short-term investor rotation out of semiconductors and into software.
- The spread seen Thursday between the two hasn't been this tilted toward software since the DeepSeek-driven AI unwind 13 months ago, Jefferies analyst Jeffrey Favuzza wrote in a note today.
Yes, but: It's a sharp one-day move — but far from a trend change, Jefferies analyst Jeffrey Favuzza noted today. Long-only investors aren't ready to declare an "all clear" for software just yet, he wrote.
Reality check: Over the past 12 months, Nvidia shares are up over 40%, while Salesforce is down 35%.
- And the potentially dramatic impact of AI on a tech workforce was seen in Jack Dorsey's announcement Thursday that he will cut 40% of Block's workforce, citing emerging tools that make it easier to do the company's work.
What we're watching: More software earnings ahead.
- The question now isn't whether AI wins — but whether SaaS can capture its share of the spoils.
