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Salesforce (CRM) is down 28% this year to $185.43. ServiceNow fell 30% and Microsoft fell 17%. Dan Ives says software now represents a ‘generational buy’ opportunity.
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Salesforce trades at forward earnings of 14.2x, despite a $900 million AI ARR increase of 120% year-over-year.
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ServiceNow posted third-quarter revenue of $3.41 billion, up 22%, but couldn’t escape the industry sell-off.
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As software stocks tumble on fears of AI disruption, Wedbush analyst Dan Ives takes a contrarian stance on the selloff. Ives says the current sell-off is “the worst he’s seen in 25 years” but believes investors are making a critical mistake by viewing enterprise software as outdated in the AI era.
The numbers tell a cruel story. Salesforce (NYSE: CRM) is down 28% this year to $189.72, while ServiceNow (NYSE: NOW) is down 30.1% to $107.08 in 2026. Even Microsoft (NASDAQ:MSFT) has not been spared, falling 17% this year.
Ives’ argument rests on the fundamental belief that ‘artificial intelligence will complement existing software models rather than replace them’. He’s not alone. Morgan Stanley (NYSE:MS) recently argued that “generative AI could add approximately $400 billion to the broader totally addressable enterprise software market by 2028” and noted that software multiples have compressed 33% since October 2025.
Goldman Sachs (NYSE:GS) CEO David Solomon echoed this view, calling the AI software sell-off overblown and suggesting that many companies will adapt successfully. The valuation story is convincing. Salesforce now trades at just 14.4x forward earnings, despite booking $900 million in Data Cloud and AI ARR, up 120% year-over-year.
Salesforce CEO Marc Benioff attempted to counter the negative narrative surrounding the company’s recent earnings results by warning investors to “beware the rogue agent” and claiming that Salesforce is “light years ahead of other providers.” The company’s Agentforce platform, with more than 3,000 paid customers, demonstrates its efforts to integrate AI into its existing platform.
The fear gripping software investors is not irrational. OpenAI’s Frontier platform and the rise of AI agents threaten to commoditize what enterprise software companies have spent decades building. ServiceNow reported strong third-quarter revenue of $3.41 billion, up 22% year over year, but its stock price still plummeted.
The market is pricing in a world in which traditional SaaS models become obsolete. Even positive results can’t overcome that story. ServiceNow’s aggressive acquisitions suggest the company is not sitting still when it comes to AI disruption. One area of expansion is security. Right now the market is selling off security companies, but the story could quickly change if there is a series of major attacks this year using swarms of agents.
Microsoft’s 17% decline this year shows that even companies at the forefront of AI development are not immune to the industry-wide sell-off. The software giant has been a leader in integrating AI into its product offerings, but investor fears about the broader software market have weighed on the stock.
Microsoft is stuck between a rock and a hard place. Investors sold the stock due to future Azure projections (about 38% growth) that fell below expectations. It’s not that there is no demand, but Microsoft is running out of computing capacity because it has to dedicate parts of their infrastructure to internal projects.
That’s the right decision. Today, by leasing more capacity to Anthropic or OpenAI, Microsoft is generating revenue to give more capacity to the companies that are disrupting it. Microsoft needs much better AI capabilities in its own software if it wants to defend revenue growth in core franchises like its Office products.
Ives believes the sell-off represents a significant gap between market prices and fundamental value. The dot-com crash, the 2008 financial crisis and the 2022 tech sell-off saw quality names trading at low valuations during periods of sector panic. But this time the technological shift is real and accelerating.
For Ives’ theorem to prove correct, AI must expand the software market rather than cannibalize it. The bull case rests on whether enterprise software companies can successfully integrate AI into their platforms rather than be displaced by it. The bear case assumes that AI agents will bypass traditional SaaS entirely, leaving current valuations still too high.
I expect to see a broader separation as the year progresses. There could be a world where Salesforce continues to sell as market sentiment toward ServiceNow or other software verticals changes.
Wall Street currently expects Microsoft to post earnings of $18.85 next year. That means the company is currently trading at around 21x earnings. Right now I’m a buyer, but a little more moderate. The company will face more negative sentiment as it seeks a balance between providing computing power to internal projects and renting it out through Azure.
However, if negative sentiment continues and Microsoft falls to the low $300s, bringing its price-to-earnings ratio closer to the mid-teens, I would switch from a moderate buyer to buy the company hand over fist.
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