A lot of S&P 500 software stocks have been crushed recently. Amid fears that artificial intelligence (AI) is going to hurt their business models, some names in this space have fallen 50% or more.
However, the sell-off is overblown, according to Wedbush Securities managing director Dan Ives. He reckons this is the most disconnected trade he’s seen in his multi-decade Wall Street career, and he’s highlighted a stock offering a ‘historical’ buying opportunity.
A disconnect between stock prices and fundamentals
Ives – a well-known tech analyst – has been a vocal critic of the recent software crash. Speaking on CNBC recently, he said that the ‘AI is going to kill software’ narrative is a doomsday scenario that ignores reality.
In his view, large enterprise businesses aren’t suddenly going to replace established software infrastructure for unproven AI solutions. He believes that software from the likes of Microsoft and Oracle, and all the related data, is so entrenched in enterprises today that these software companies have moats.
It’s worth pointing out that Ives does believe that some software firms will be disrupted by AI. However, overall, he believes there’s a massive disconnect between stock prices and fundamentals at present.
He sees the current sell-off as a “DeepSeek-type moment” in which investor panic is unjustified. Looking ahead, he believes that this will turn out to be a golden buying opportunity.
A stock that could rise 100%
Now, on CNBC, Ives highlighted a few different stocks that he sees as oversold at present. However, one he really focused on was Salesforce (NYSE: CRM). It’s taken a massive hit this year, falling from around $265 to $180. At today’s share price, it’s about 50% below its all-time highs.
Ives reckons that at current prices, there’s a historical buying opportunity here. Because he believes that the company will see accelerating growth as its agentic AI offering, Agentforce, gains momentum with customers.
He expects revenue growth to rise from 8%-10% now to somewhere in the teens in the years ahead. He also believes that in the long run, Salesforce will be a core player in the AI revolution.
Note that his price target for the stock is currently $375. That’s more than 100% above the current share price.
An investment opportunity?
Is Salesforce worth a look at current levels? I think so. Recently, it’s been having a lot of success with its Agentforce platform. It’s still very early days here (it was only launched in late 2024) but in the long run, there’s huge potential.
As for the valuation, it’s really low at present. Currently, the forward-looking price-to-earnings (P/E) ratio is just 13.6.
Of course, AI does introduce some uncertainty for its existing customer relationship management (CRM) software. Some firms may opt to create their own products while AI-related job losses could lead to a reduction in the number of licenses that the company can sell.
However, with the stock down 50% and trading on a P/E ratio of 13.6, I like the risk/reward proposition. I feel it’s worthy of further research.
