Wedbush Goes Against the Trend, Bullish on Software Stocks: Software Will Become the "Heart and Lungs" of the AI Revolution

Dan Ives, an analyst at Wedbush Securities and a long-time technology bull, believes that Wall Street may be making a mistake in artificial intelligence trading.

In a television interview on Tuesday, Ives stated that the recent pessimism among investors toward software stocks is “the most disconnected view I have ever seen.”

While much of the excitement around artificial intelligence has focused on data centers, chips, and GPUs, Ives said that software will become “the heart and lungs of the AI revolution.”

He noted that AI infrastructure building is still in its early stages and may continue for the next decade. However, he added that software is where the real use cases and monetization will emerge.

Ives argued that the assumption that large software companies like Salesforce and ServiceNow will “structurally collapse” or be replaced by AI-native tools is incorrect.

Ives indicated that these companies are deeply embedded in the enterprise ecosystem and have hundreds of thousands of clients. He also pointed out that the AI application cases of these companies could bring in additional revenue in the next six to eighteen months, but currently investors have not factored this in.

Large and well-established platform companies should not be compared to smaller businesses serving SMEs. “You can’t judge all these companies by the same standard,” Ives said.

Ives also defended Microsoft’s role in the AI revolution. Although he acknowledged concerns about capital expenditures and Azure’s development in the short term, he said that the widespread adoption of AI would not succeed without Microsoft’s software and cloud ecosystem.

Ives made these comments following a sharp decline in U.S. software stocks last week, as investors worried that artificial intelligence could have a major impact on the entire industry.

Not all leaders in technology and finance believe that AI will replace traditional software companies. Nvidia CEO Jensen Huang refuted this view at a Cisco AI event last week.

Huang said: “There is a view that the tools industry is declining and will be replaced by artificial intelligence. You can see this reflected in the fact that many software companies’ stock prices are under tremendous pressure because some believe AI will replace them. This is the most illogical thing in the world, and time will prove everything.”

Huang stated that AI depends on the functions provided by the tool software used, citing companies such as ServiceNow, SAP, Cadence, and Synopsis as examples, saying that these companies are all in a favorable position in the era of artificial intelligence.

Editor: Yu Jian SF069