Software Stocks Rally Amid AI Excitement
The CEO of Snowflake, Sridhar Ramaswamy, is set to ring the closing bell at the New York Stock Exchange on September 30, 2025.
It seems that the turmoil often referred to as “SaaSpocalypse” may not be fully over, but for now, worries about the software sector’s decline seem to have faded a bit.
This past week, software stocks received a significant boost, driven by impressive earnings reports. Companies like Snowflake and Okta are indicating that some businesses are navigating the disruptions caused by artificial intelligence more successfully than many on Wall Street anticipated.
The iShares technology software ETF jumped 8% this week and ended May with a total gain of 21%. This marked its best monthly performance since October 2001. Although the current rally is reminiscent of the brief rebounds during the dot-com collapse, it’s largely fueled by fears related to AI’s impact across the industry.
Software firms have faced considerable challenges over the last year due to the “vibecoding” boom, where users can create applications and websites in a matter of minutes with tools from companies like Anthropic and OpenAI.
With the gains seen this month, the iShares Software ETF is down only 3.8% for the year, which is still quite a contrast to the Nasdaq’s 18% rise in 2026.
Snowflake has emerged as a leading player this week, experiencing a remarkable 50% surge over just four trading days after a holiday. The company disclosed a substantial $6 billion agreement with Cloud and Chip, and with a growing customer interest in AI solutions, it has raised its forecasts.
Ramaswamy noted in a recent earnings call that “customers are deploying and scaling workloads at a faster pace.”
Analysts from Argus Research view Snowflake as a solid investment in the generative AI space, increasing their price target for the stock from $250 to $300. On Friday, shares closed at $255.55, marking a 17% increase since the year began. The analysts believe that Snowflake is strategically positioned to benefit from developments in generative AI as businesses increasingly require the integration and harmonization of data—exactly what Snowflake specializes in.
Meanwhile, Okta also had an impressive week, recording a 30% gain on Friday. The company reported results that surpassed expectations, suggesting that the shift towards AI is pushing organizations to invest more in identity security tools to counteract threats from robotic infiltrations.
Okta’s CEO, Todd McKinnon, shared with CNBC that while “AI products will take more time to develop,” every organization is essentially going to need to build and deploy these agents. It’s poised to become the foundational infrastructure we will rely on for many years.
In the broader software landscape, companies like Atlassian saw an increase of 26% over the week, while ServiceNow and others gained significantly—Shopify, Working Day, and Asana each rose by at least 14%.
Among larger software entities that also provide cloud services, Oracle experienced a 16% increase, while Microsoft’s stocks rose nearly 8%. However, Microsoft continues to struggle, down close to 7% since the year’s start, making it a laggard among tech giants.
In summary, the market seems to be favoring software companies that are collaborating with AI leaders, reflecting a possible shift in the industry’s dynamics.
