$iShares Expanded Tech Software Sector ETF(IGV.US)

Okay, let’s talk about software…

Here’s my question: are software stocks actually ready to breakout or is this move legit?

If it is legit, then it may be time to buy the breakout.

Software stocks I bought during the SaaSpocalypse:

$Palantir Tech(PLTR.US), $Zeta Global(ZETA.US), $Reddit(RDDT.US), $Shopify (SHOP.US), $Oracle(ORCL.US).

I bought a very small amount of $Microsoft(MSFT.US) at $413, my bigger DCA on the Mag 7s has been $Meta Platforms(META.US) over $Microsoft(MSFT.US). I believe $Meta Platforms(META.US) is a fantastic risk/reward right now but they still have narrative issues to revolve. However, given the new chip news with Microsoft/Nvidia/ARM, it seems like Microsoft could have a breakout.

Buying that name into strength is NOT scary given it’s…Microsoft. If they actually start selling chips to Anthropic, they may completely get rerated.

But, what about everything else? Are the rest of these software names scary to buy into a breakout after their run?

I know this chip names have done amazing, but take a look at the performance of these SaaS names since the lows…

$Datadog(DDOG.US) +152%

$Snowflake(SNOW.US) +116%

$Reddit(RDDT.US) +45%

$Zeta Global(ZETA.US) +59%

$ServiceNow(NOW.US) +53%

$Palantir Tech(PLTR.US) +28%

$Shopify (SHOP.US) +26%

$Oracle(ORCL.US) +62%

$CrowdStrike(CRWD.US) +107%

$Palo Alto Networks(PANW.US) +91%

Last week, people were saying Shopify would be vibecoded away. ServiceNow would be going out of business. I mean just absurd commentary on incredibly important companies.

If the software narrative being destroyed is gone, why wouldn’t these names be buys into the breakout? Assuming no broader macro drawdown, is the risk reward not still very strong for these names?

Many of them are still DOWN year to date. If token spend is going to normalize (as per Anthropic not raising costs for Opus 4.8) and the market finally realizing that all this token demand is actually coming from the SOFTWARE companies processing and orchestrating it…then it feels like the SaaS breakout could be just beginning and even if you missed the drawdown, buying these names into strength wouldn’t be scary given their multiples are still compressed but their growth rates continue to match some of the best chip names.

Did you buy SaaS during the drawdown? Are you buying more software names into strength?

Source: amit