JPMorgan expresses a bullish outlook for the software sector, anticipating an extended rally. Analysts believe upcoming third-quarter earnings will demonstrate robust artificial intelligence demand, boosting infrastructure software companies. This trend is expected to alleviate investor concerns about AI disrupting traditional application software business models.
The bank highlights Snowflake, Microsoft, ServiceNow, and Cloudflare as top picks heading into earnings season. JPMorgan anticipates positive revisions to earnings estimates for infrastructure software firms like Snowflake. Secular tailwinds from AI drive these revisions. Positive sentiment reflects a broader market rebound for software stocks in the third quarter. The IGV software index gained 36% over the last six months. This gain outpaced the S&P 500.