How to gauge if the bottom is in for software stocks
Speakers
Stephanie Link — Chief Investment Strategist, Hightower
— Hightower CIS
Josh Brown — CEO, Ritholtz Wealth Management
— Ritholtz Wealth CEO
Summary
- SaaS "Apocalypse" Narrative: The panel debates whether the current sell-off in software (driven by fears that AI agents will replace traditional SaaS) is a buying opportunity or a structural shift.
- The "Meat Computer" Defense: Josh Brown argues the notion that small businesses (plumbers, carpenters) will use AI to code their own software instead of using established vertical SaaS (like Service Titan or Toast) is "the dumbest thing in the world."
- Jensen Huang's Defense: A clip is played where Nvidia's CEO argues AI agents will likely live inside existing platforms (ServiceNow, Salesforce) rather than replace them, as these platforms possess the domain expertise and customer data.
- Valuation Disconnect: Stephanie Link points out that despite "apocalyptic" sentiment, companies like Snowflake are still growing product revenue at 30% with expanding margins, creating a dislocation between price and fundamentals.
Trade Ideas
Software stocks are oversold, but the market is questioning their "Terminal Growth Rates" due to AI disruption. While the "death of SaaS" is exaggerated, the market requires proof that these companies can monetize AI agents rather than be replaced by them. Jensen Huang's commentary (that agents will run *on* these platforms) is the bullish thesis, but price action remains weak. WATCH. Likely to be long eventually, but not calling the absolute bottom yet. AI agents bypassing the user interface of these apps, reducing seat-based pricing power.
Snowflake reported 30% product revenue growth, 42% RPO growth, and 125% net retention, yet the stock is being punished with the broader sector. The market is pricing this as a broken growth story, but the fundamentals show sticky customer behavior. Management has shifted to being conservative with guidance, setting up a "beat and raise" cadence. Margins have expanded from 9% to 15%, showing operating leverage. LONG. The sell-off is an opportunity to buy a high-growth asset at a compressed multiple. Continued compression of software multiples due to AI displacement fears.
Investors are dumping vertical SaaS names (like Toast and Service Titan) on the fear that AI will allow customers to build their own software solutions. This is "Second-Order Thinking" gone wrong. Blue-collar industries (carpenters, restaurants) will not stop using purpose-built software to code their own billing systems via AI. These "System of Record" companies are sticky and essential. LONG. The selling is emotional and disconnected from the reality of how businesses operate. Long-term pricing power erosion if AI agents commoditize software features.
IBM stock dropped ~12% following news about "Claude Code" potentially replacing legacy coding (a core IBM competency). The market reacted to a headline about legacy code maintenance, ignoring that IBM has successfully pivoted toward a hybrid AI/Consulting book of business. The sell-off created a valuation entry point. LONG. Buying the panic dip. AI coding tools accelerating faster than expected, eroding IBM's legacy consulting revenues.
Scott Wapner
Host, CNBC
Joe Terranova sold his position in Zoom today. Despite the broader software discussion, specific names like Zoom are failing to convince investors of their AI pivot or growth re-acceleration. AVOID. Loss of institutional sponsorship. Unexpected buyout or successful AI product launch.
Stephanie Link
Chief Investment Strategist, Hightower
Stock is down 35% from highs despite growing earnings 24% and revenue 66%. It trades at a 6-turn discount to competitor Cadence (CDNS). As AI chips become more sophisticated, the demand for EDA (Electronic Design Automation) software increases. This is "mission critical" software for chipmakers. The acquisition of Ansys expands their TAM significantly. LONG. A derivative play on the AI chip boom that has been unfairly dragged down. Regulatory hurdles regarding the Ansys acquisition.
Up Next
This CNBC video, published February 26, 2026, features Rob Sechan, Stephanie Link, Josh Brown, Scott Wapner discussing CRM, NOW, WDAY, SNOW, TOST, IGV, IBM, ZM, SNPS. 6 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Rob Sechan, Stephanie Link, Josh Brown, Scott Wapner · Tickers: CRM, NOW, WDAY, SNOW, TOST, IGV, IBM, ZM, SNPS