TLDR
- Dan Ives from Wedbush Securities characterized the software sector’s recent decline as the most illogical trade he’s witnessed in two decades
- The iShares Expanded Tech-Software Sector ETF has plummeted 19% year-to-date, contrasting sharply with the S&P 500’s modest 0.4% decline
- According to Ives, concerns about artificial intelligence undermining conventional software enterprises are exaggerated
- His forecast suggests approximately 30% of AI-related capital will migrate toward established software providers including Salesforce, ServiceNow, and Workday
- Recent product announcements from Anthropic regarding AI agents may indicate a turning point for software equities, according to Ives
Dan Ives, an analyst at Wedbush Securities, delivered a forceful rebuttal to the persistent decline affecting software stocks during a Tuesday appearance. At the Future Proof conference broadcast on CNBC, he characterized the situation as the most illogical technology sector movement he’s observed across 15 to 20 years.
Year-to-date performance shows the iShares Expanded Tech-Software Sector ETF declining 19%. This stands in stark contrast to the S&P 500, which has experienced a minimal 0.4% decrease during the identical timeframe.
Ives attributed the decline to what he termed an “AI ghost trade.” According to his assessment, market participants have dramatically overstated concerns that artificial intelligence will eliminate traditional 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 position emphasizes that genuine AI value resides within established software infrastructures rather than emerging pure-play artificial intelligence ventures. Ives maintains that data repositories and customer bases accumulated by firms such as Salesforce, ServiceNow, Workday, and Oracle constitute the legitimate foundation for AI’s commercial trajectory.
Why Ives Thinks Software Will Win the AI Race
Ives projects that roughly 30% of total AI expenditures will ultimately channel toward software enterprises. He referenced Palantir as an initial demonstration of successful monetization strategies within this domain.
Additionally, he highlighted recent announcements from AI firm Anthropic concerning its agents technology as a possible indication that software stocks are approaching their nadir.
“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.
Ives anticipates increased 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 market capitalization. Its valuation metrics include a price-to-earnings ratio of 41.43 and a price-to-sales multiple of 20.24.
Technical analysis reveals the ETF’s 50-day moving average positioned at 92.27, trailing its 200-day moving average of 105.22. This divergence indicates ongoing bearish momentum.
With a beta coefficient of 1.3, the ETF demonstrates higher volatility relative to broader market indices. Its volatility measurement registers at 27.18.
Notwithstanding the recent downturn, the fund maintains a return on equity of 35.2%, while its Altman Z-Score of 20.35 indicates the constituent companies retain solid financial health.
Ives employed a vivid metaphor to encapsulate his 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.”
The iShares Expanded Tech-Software Sector ETF demonstrates a three-year revenue expansion rate of 18.97% alongside a gross margin of 74.37%.
