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▲ Oracle (ORCL), Data Center, Artificial Intelligence (AI) / AI Generated Image
An analysis suggests that the strongest buy signal in months has emerged for software stocks, which Wall Street had previously ignored.
According to BeInCrypto on September 10 (local time), Dan Ives, a partner and senior managing director at Yorkville Ives, appeared on CNBC Fast Money and argued that institutional investors should increase their allocation to software stocks again. He identified Oracle (ORCL), Adobe (ADBE), Palantir (PLTR), and Snowflake (SNOW) as key stocks. Oracle's recent earnings performance is seen as a turning point in investor sentiment.
Ives pointed out that Wall Street had excessively underestimated Oracle's backlog. He explained that the market reflected a 50-60% chance that the backlog would not convert into actual revenue. Whether the revenue converts depends on how much data center capacity Oracle secures to meet the demands of its cloud and artificial intelligence (AI) customers. Ives described Oracle as a "stock stuck in the penalty box." However, he emphasized that a single strong earnings report would not completely change market perception.
Compared to semiconductors, the recovery of the software sector is still in the verification process, according to the analysis. Ives explained that the supply and demand ratio in the Asian semiconductor market is 13:1. Therefore, Nvidia (NVDA) is a safer choice while AMD or Intel (INTC) close the gap. In contrast, software stocks had been sluggish for several months due to concerns about the spread of artificial intelligence, but recent earnings reversals have changed the atmosphere.
Ives assessed that the change is not limited to specific companies but is spreading across the entire software sector. However, he did not yet conclude that it is a clear buy signal. He described the current signal as "close to lime green." This means it's not yet a stage for investors to blindly chase purchases, but rather a period where the sector needs to prove its recovery with performance.
The key variable going forward is Oracle's subsequent earnings. For the market to recognize Oracle's backlog as actual revenue, data center expansion and revenue conversion must continue. Ives' assessment also focuses less on declaring that software stocks have already entered a full bull market, and more on the idea that Wall Street's perspective is beginning to shift from selling to buying.
[Key Article Summary]
-Dan Ives assessed that Oracle's performance triggered the strongest buy signal in months for software stocks.
-Wall Street had excessively underestimated the likelihood of Oracle's backlog converting to revenue, and future data center expansion was identified as a key variable.
-Ives stated that it is not yet a full buy signal, describing the current situation as a "lime green" stage.
*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*
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