Dan Ives: Software sector will start to bottom from current levels
Speakers
Dan Ives — Managing Director, Wedbush Securities
— Wedbush analyst
Summary
- Software Sector Bottoming: Ives believes the software sector (specifically names like Salesforce and ServiceNow) is starting to bottom at current levels, driven by validation from recent AI funding rounds (OpenAI, Anthropic).
- Nvidia's "Good is Bad" Reaction: Despite a "perfect" earnings report with a $500B+ pipeline and strong guidance, NVDA sold off. Ives attributes this to peak investor nervousness rather than fundamentals, maintaining a bullish stance.
- Microsoft's Disconnect: Ives calls Microsoft the "most disconnected stock" in years, trading sub-$400 despite an expected incremental $25-30B in AI revenue. He views the current "do not enter" sentiment as a major buying opportunity.
- Amazon Valuation: Amazon is viewed as having its most attractive "sum of the parts" valuation in 4-5 years, with data center acceleration expected to drive future growth.
Trade Ideas
Ives states that despite Nvidia's "perfect" report ($70B guidance, $500B+ pipeline), the stock sold off because "investors are as nervous as I've seen... good is bad." He explicitly names "Nvidia, AMD, Micron" as the "winners on chips" to look at during this turbulence. The market reaction is emotional ("nervousness"), not fundamental. The AI infrastructure build-out is confirmed by data center revenue and funding rounds. Therefore, the pullback offers an entry into the clear winners of the chip race. LONG these chip leaders on the dip. Continued negative sentiment where positive news is sold ("good is bad"); potential delays in Blackwell/Rubin roadmaps.
Ives explicitly says, "I think software is going to start to bottom here... Salesforce, ServiceNow and others." The massive funding rounds for OpenAI and Anthropic serve as validation for the broader software ecosystem. As the infrastructure (chips) is built out, the value accrual will begin to shift toward the application layer (software), which is currently oversold. LONG the software leaders as they form a bottom. Enterprise IT spending slowdown; AI taking longer to monetize in SaaS than expected.
Ives calls MSFT "probably the most disconnected stock that I've seen in the last few years relative to where it's trading" (sub-$400). He notes that while investors are "heading for the elevators," he sees an incremental $25-30B in revenue coming from AI. The market is treating MSFT as a "do not enter zone" due to fears of Amazon/others catching up, but Ives believes the numbers are "significantly underestimated." The valuation disconnect relative to its enterprise dominance makes it a top pick. LONG for the valuation catch-up. Slower than expected Azure AI adoption; increased competition from AWS.
Ives states that on a "sum of the parts" basis, Amazon is the "most attractive it's been in probably the last 4 or 5 years." He highlights data center acceleration and Jassy's AI investments. Like Microsoft, Amazon is being "thrown out" by nervous investors despite strong fundamentals in its cloud/data center business. The valuation support provides a floor for a long-term recovery. LONG on valuation and cloud growth. Continued margin pressure or slowing AWS growth relative to Azure.
