TLDR
- Dan Ives from Wedbush Securities labeled the software stock selloff as one of the most illogical trades witnessed in two decades
- iShares Expanded Tech-Software Sector ETF has plummeted 19% year-to-date versus the S&P 500’s modest 0.4% decline
- Ives dismisses concerns that AI will cannibalize legacy software businesses
- His forecast suggests 30% of total AI investment dollars will benefit incumbent platforms including Salesforce, ServiceNow, and Workday
- Recent product launches from Anthropic may signal a turning point for battered software equities, according to Ives
Dan Ives, a managing director at Wedbush Securities, delivered a forceful defense of the embattled software sector during his Tuesday appearance at the Future Proof conference on CNBC. He characterized the current market dynamics as among the most illogical technology trades witnessed over the past two decades.
Year-to-date performance shows the iShares Expanded Tech-Software Sector ETF tumbling 19%. Meanwhile, the broader S&P 500 index has registered only a marginal 0.4% decline during the identical timeframe.
Ives attributed the sector’s underperformance to what he termed an “AI ghost trade.” According to his analysis, market participants have dramatically overestimated the existential threat artificial intelligence poses to conventional software enterprises.
“It’s ultimately software that the use cases from Salesforce to ServiceNow to ultimately cybersecurity is gonna protect the CrowdStrike, Palo Alto and others,” Ives said during the interview.
His central thesis maintains that genuine AI value creation will occur within mature software ecosystems rather than standalone AI ventures. Companies possessing extensive data repositories and customer relationships—such as Salesforce, ServiceNow, Workday, and Oracle—represent the true infrastructure enabling AI commercialization, Ives contends.
Why Ives Thinks Software Will Win the AI Race
Ives projects that roughly 30% of aggregate AI capital expenditures will ultimately channel toward established software providers. He cited Palantir as a prototype demonstrating successful monetization strategies within this evolving landscape.
Additionally, he highlighted recent product innovations from Anthropic in the autonomous agents category as potentially marking a capitulation point for oversold software names.
“My whole point is that, yeah, is it gonna disrupt pure play software one trick pony, some vendors? But the reality is the data, the value, it’s in the stacks,” Ives said.
The analyst also anticipates accelerated merger and acquisition activity throughout the software industry as challenging market conditions persist.
Market Sentiment and ETF Data
The iShares Expanded Tech-Software Sector ETF maintains approximately $10.88 billion in total assets under management. Current valuation metrics include a price-to-earnings multiple of 41.43 and a price-to-sales ratio of 20.24.
From a technical perspective, the fund’s 50-day moving average stands at 92.27, positioned beneath its 200-day moving average of 105.22. This configuration indicates ongoing bearish momentum.
With a beta coefficient of 1.3, the ETF exhibits heightened sensitivity relative to broader equity indices. Its annualized volatility measurement registers at 27.18.
Despite recent price deterioration, the fund maintains a robust 35.2% return on equity metric, while its Altman Z-Score of 20.35 indicates strong financial health among constituent holdings.
Ives employed a vivid metaphor to encapsulate his contrarian perspective: “Right now, the Miami cab driver is bearish in software, and I think that’s a bullish sign relative to where I see software this year.”
Historical performance data reveals the iShares Expanded Tech-Software Sector ETF has delivered 18.97% annualized revenue expansion over the trailing three-year period, complemented by an impressive 74.37% gross profit margin.
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