In the aftermath of a significant global tech shake-up on Monday, driven by concerns over U.S. leadership in artificial intelligence following announcements from Chinese startup DeepSeek, software companies are emerging as potential beneficiaries. While other segments of the tech industry experienced notable declines, several software stocks managed to remain stable. Analysts from BMO Capital Markets and Canaccord Genuity have expressed optimism about the future prospects for this sector, with some even calling it a "watershed moment" for software development. This article explores the reasons behind this positive outlook and examines how specific software companies are responding to these changes.
The recent developments surrounding DeepSeek have sparked a reevaluation of AI strategies. According to analysts, the emergence of alternative approaches to building large-scale AI clusters could lead to increased competition and innovation within the software industry. Kingsley Crane from Canaccord Genuity highlighted that this shift towards more diverse and competitive models is expected to reduce costs and enhance technology. He believes that such an environment will accelerate the momentum for software creation, benefiting companies that can adapt quickly to these changes.
BMO analyst Keith Bachman echoed similar sentiments, noting that the DeepSeek news may present opportunities for certain software firms. Specifically, he pointed out Salesforce, ServiceNow, and HubSpot as potential winners in this new landscape. HubSpot has already shown strong performance, surging over 6% since Monday, contributing to a year-to-date gain of approximately 12%. The company’s stock has been on an upward trajectory, extending gains from last year. However, analysts predict a slight pullback in the near term, with shares potentially sliding by 3% based on current price targets. Despite this, most analysts maintain buy ratings, indicating confidence in its long-term prospects.
Salesforce has also seen a positive response, with a nearly 6% increase this week. This brings its year-to-date advance to over 5%, building on a robust rally of just over 27% in 2024. Analysts generally hold buy ratings for Salesforce and anticipate further upside potential, with an average price target suggesting a rise of more than 12%. ServiceNow, another key player, has added around 3% this week, extending its 2025 increase to almost 9%. Following a surge of slightly more than 50% in 2024, analysts expect a minor retreat but still see significant growth ahead.
While not all software companies are expected to benefit equally, the overall sentiment remains optimistic. Analysts like Bachman acknowledge that the impact on hyperscalers such as Microsoft and Oracle is less clear. Nonetheless, the changing dynamics in AI development present a promising outlook for innovative software firms. As the industry continues to evolve, companies that can harness the power of diverse and competitive AI models stand to gain the most from this transformative period.