Monthly Archives: February 2026

Wall Street Analysts: The Selloff Has Gone Too Far—U.S. Software Stocks Have Fallen Into a “Golden Pit”

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Mark Luschini, Chief Investment Strategist at Janney Montgomery Scott, said: “It seems people now think software prices will fall in a straight line to zero. This one-sided trade is so obvious that it could actually set the stage for a rebound.”

These stocks are currently at historic lows. The forward price-to-earnings ratio of the S&P North American Software Index fell below 20 for the first time last week. Although it has since rebounded to around 23 times as stocks recovered somewhat, it remains well below its long-term average P/E of 34.

Jefferies studied the 64 software stocks under its coverage and found that “42% are trading at or near their historical undervaluation levels,” analysts led by Brent Thill wrote in a report to clients on Sunday.

Michael Toomey of Jefferies’ equity trading desk said, “I think software stocks are about to see a strong rebound.” Technical traders at BTIG expressed a similar view, writing in a report last week that software stocks are “on the verge of capitulation and should find a tactical bottom here.”

The rebound appears to have already begun. A closely watched ETF tracking the software industry fell 15% over eight consecutive trading days from January 26 to February 4, but has since rebounded 7.2%. According to Vanda Research, retail investor buying of the ETF “hit a record,” which Vanda described as “one of the most aggressive instances of dip-buying in tech stocks—particularly software stocks—that we have observed in our dataset.”

Although uncertainty still hangs over the sector, the selloff has been so broad that many companies previously expected to be long-term winners have not been spared. Companies most frequently cited by market experts include Microsoft (NASDAQ:MSFT), Snowflake (NYSE:SNOW), ServiceNow (NYSE:NOW), Salesforce (NYSE:CRM), and Palantir (NASDAQ:PLTR).

Data analytics software company Snowflake fell 27% in just six trading days from January 29 to February 5. However, the company holds a favorable position within the artificial intelligence ecosystem. Last week, Snowflake signed a $200 million multi-year partnership agreement with OpenAI and reached a similar deal with Anthropic PBC in December. In a February 5 report to clients, Thill wrote that Snowflake is “one of the clearest AI beneficiaries in the entire public software universe.” Institutions including UBS, Loop Capital, Wedbush, Bank of America, and DA Davidson have also spoken highly of Snowflake.

Michael Mullaney, Director of Global Market Research at Boston Partners, noted the weakness in Salesforce, ServiceNow (NYSE:NOW), and Workday (NASDAQ:WDAY). He said that if he were focused on growth stocks rather than value stocks, he would be buying these names on the dip.

Datadog (NASDAQ:DDOG) was also mentioned. Its shares surged 14% on Tuesday, marking the biggest gain since November, after the company reported strong results and issued better-than-expected revenue guidance.

AI coding—using artificial intelligence to write software code—is at the core of the market’s bearish sentiment toward software. If AI services offered by companies such as Anthropic or OpenAI can replace existing software packages, it would put significant pressure on the revenues, margins, and pricing power of the displaced companies. The recent stock market plunge was largely triggered by Anthropic’s launch of a legal workflow automation tool, followed by another tool focused on financial research. Earlier, an AI tool from Alphabet Inc. had also caused sharp declines in video game and mobile advertising stocks.

So far, this disruptive shift has largely been anticipated, but its magnitude remains difficult to quantify. Industry research forecasts that earnings growth for the software and services sub-sector will reach 14.1% in 2026. While this growth rate is below the broader technology sector’s expected 31.7% expansion—driven by the booming semiconductor industry—it exceeds the S&P 500 Index’s projected growth rate of 13.7%. Software sales are showing a similar trend.

Luschini of Janney said: “There’s a lot of speculation about what might happen, but so far nothing has actually happened. The market is trying to price in future risks, but at this point, that speculation seems more hypothetical than real.”

Even so, software skeptics do have some warning signs to point to. Shares of monday.com (NASDAQ:MNDY) fell 21% earlier this week after the company issued disappointing revenue guidance. S&P Global (NYSE:SPGI) also dropped 9.7% on Tuesday after releasing similarly disappointing earnings guidance.

However, most of these cases appear to be isolated. Data show that of the 10 software companies in the S&P 500 that have reported earnings so far this season, all 10 exceeded earnings expectations and eight beat revenue estimates. This outperformance rate exceeds that of the broader S&P 500, where 81% of companies have beaten earnings expectations and 66% have topped revenue forecasts.

Mullaney said such performance demonstrates that current trends are not severe enough to justify investors abandoning the software sector altogether. “A mere slowdown in earnings growth does not explain the magnitude of these stock declines,” he said. “However, I do believe that concerns about AI-driven disruption provide a reasonable justification for profit-taking.”

DRAM Supply Shortage Expected to Last Until 2028, Micron Target Price Raised by Deutsche Bank by Nearly 70%

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As the storm of rising storage prices intensifies, U.S. memory chip giant Micron Technology (NASDAQ:MU) has seen its target price raised once again.

Deutsche Bank significantly raised its target price for Micron Technology while maintaining its “Buy” rating on the stock. The bank’s analysts recently stated that the current memory cycle is “different from past cycles,” which could mean that Micron’s stock still has substantial room for growth.

Deutsche Bank analyst Melissa Weathers expects the supply shortage of dynamic random-access memory (DRAM) to last until at least 2027 or even 2028—especially as the artificial intelligence (AI) boom has led to a surge in demand for high-bandwidth memory (HBM).

HBM is made by stacking DRAM chips and is critical for advanced AI chips, such as those designed by NVIDIA (NASDAQ:NVDA). Micron, along with South Korea’s SK Hynix and Samsung Electronics, is considered one of the “Big Three” in the global HBM market, with the three companies collectively monopolizing more than 97% of the global HBM market share.

In a report released on Tuesday, Weathers noted that compared to traditional DRAM, HBM has approximately three times the “silicon density,” meaning it requires more wafers for chip cutting. She stated that this high density “is causing a supply shock that we believe has not been fully understood.” The supply tightness has enabled companies like Micron to raise prices and sign long-term contracts with customers.

At the same time, Weathers noted that new DRAM wafer plants will take at least two years to come online, and the expansion capacity of existing plants is limited, making it difficult to alleviate the demand pressure. However, she mentioned that as new production capacity gradually comes online next year, the supply constraints may ease.

Weathers believes these trends will create “a more structurally profitable environment” for Micron, raising the stock’s target price by a substantial 67% to $500—more than 30% above the latest closing price.

Deutsche Bank also raised its earnings per share (EPS) forecast for Micron’s fiscal year 2026 to $46.50, with the new target price based on about 11 times this number.

Micron’s stock fell 2.67% on Tuesday, continuing the downward trend from Monday, after reports surfaced that Micron’s competitor Samsung plans to begin mass production of next-generation HBM4 later this month, for use by NVIDIA (NASDAQ:NVDA) in its upcoming Vera Rubin graphics processing unit (GPU).

Over the past year, Micron’s stock has surged by an impressive 300%. Recently, several investment banks, including UBS, Mizuho, and HSBC, have raised their ratings on the stock.

Last month, during Micron’s first-quarter fiscal year 2026 earnings call, the company stated that all of its HBM capacity for 2026 had already been sold out, and it expects the total addressable market (TAM) for HBM to reach $100 billion by 2028 (up from $35 billion in 2025).

OpenAI Races Towards $100 Billion Financing, Altman Claims ChatGPT’s Monthly Growth Rate Returns to Over 10%

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Amid growing competitive pressure, OpenAI CEO Sam Altman has informed both employees and investors that the company is maintaining strong momentum in its development.

According to an internal Slack message seen by the media, Altman told OpenAI employees last Friday that the company’s popular AI chatbot, ChatGPT, has “reached a monthly growth rate of over 10% once again.” He also mentioned that OpenAI is preparing to launch an “upgraded chatbot model” this week.

Currently, ChatGPT has surpassed 800 million weekly users, but Google(GOOGL) and Anthropic are steadily eating into its market share. In December last year, OpenAI announced that it had entered a “Code Red” state to make comprehensive improvements to ChatGPT, temporarily putting several projects on hold and concentrating resources on this goal.

In Friday’s internal communication, Altman also mentioned that OpenAI’s programming product Codex had seen a growth of about 50% over the past week.

Codex competes directly with Anthropic’s Claude Code, which has gained a large number of users over the past year.

Last week, OpenAI released a new Codex model—GPT-5.3-Codex—and launched a standalone app for users with Apple computers. According to internal messages, Altman described the growth of Codex as “absolutely crazy.”

“It’s been an amazing week,” Altman wrote.

Investor Messaging
Insiders revealed that as OpenAI approaches completing a financing round that could reach up to $100 billion, Altman and CFO Sarah Friar have been actively pitching the company’s growth story to investors.

In private discussions, the two executives emphasized OpenAI’s advantages in the consumer sector, the expanding enterprise business, and its access to computing resources.

As part of the fundraising discussions, OpenAI presented investors with several charts. According to internal data, Codex is steadily capturing market share from Claude Code.

Insiders said that OpenAI expects the fundraising negotiations to intensify over the next two weeks.

As previously reported, OpenAI’s financing round may occur in two phases. The first phase could involve funding from Microsoft(MSFT), NVIDIA(NVDA), and Amazon(AMZN), with Amazon discussing a potential $50 billion investment in OpenAI. Following this, additional investments from entities like SoftBank could come into play, with SoftBank reportedly considering a $30 billion investment.

However, the specific details of this financing round are still in flux, and the final structure may change.

Ad Testing Launched
On Monday, OpenAI announced the launch of an ad test for ChatGPT in the United States, available to certain free and Go plan subscribers.

OpenAI stated that these ads will be clearly labeled and will appear at the bottom of the chatbot’s responses without affecting the content of the answers.

The digital advertising market has long been dominated by Google and Meta, with Amazon gradually becoming an important player in recent years.

It is reported that OpenAI expects that, in the long term, ad revenue will account for less than half of its overall earnings.