TLDR
- Software stocks bounced back hard in the third quarter as fears about AI replacing traditional business models eased.
- Jim Cramer says Salesforce and Microsoft can keep climbing, but he is watching interest rates closely.
- Salesforce rallied 46% and rolled out a new tool called Claudeforce that connects to Anthropic’s Claude.
- Chip stocks cooled off after a strong first half, with Corning and Caterpillar both dropping.
- Oppenheimer analysts named Microsoft, ServiceNow, and Braze as top AI winners in the software space.
Software stocks had a strong third quarter. Investors had worried that artificial intelligence would replace traditional business software. Those fears faded over the summer months.
CNBC host Jim Cramer called it the biggest stock market story of the quarter. He said software companies proved they could use AI to grow instead of being replaced by it.
The numbers back up his point. The iShares Expanded Tech-Software Sector ETF rose 17% during the quarter. The iShares Semiconductor ETF fell 11% over the same period.
Software Leaders Post Big Gains
Salesforce led the pack with a 46% rally. The company launched a new tool called Claudeforce during the quarter.
Claudeforce lets Salesforce customers use Anthropic’s Claude to pull data from their systems. Users can draft emails and update records using the tool.
Salesforce also posted a strong quarter and bought back its own stock while share prices were lower. Cramer said he still sees room for the stock to climb.
Microsoft gained 37% during the quarter. Cramer said the rally is just getting started.
He pointed to demand for Copilot and growth at Azure. He also said the company’s data center spending is starting to pay off.
Workday climbed 55% during the quarter. Veeva rose 60% over the same stretch.
Cybersecurity stocks held strong too. CrowdStrike gained 39% as companies spent more to guard against new AI-related threats.
Chip Stocks Cool Off as Rates Loom
Not every tech stock had a good quarter. Corning dropped close to 40% after a long run higher.
Cramer called the drop profit taking. He said he would buy the stock again if it falls further.
Caterpillar fell 24% during the same period. Cramer noted the company’s engines are increasingly used to power data centers.
Looking ahead, Cramer said his biggest worry is interest rates. The Federal Reserve raised its benchmark rate by a quarter point in September.
Higher rates have already put pressure on stocks like Home Depot. Cramer said the upcoming earnings season should show how borrowing costs are affecting companies.
Separately, analysts at Oppenheimer shared their own take on software stocks last week. They said companies could get a boost from AI driven revenue growth.
The firm named Microsoft, ServiceNow, and Braze as top picks. They said these companies serve as a system of record for client data and use pricing models tied to usage.
Oppenheimer said Microsoft has unmatched reach across a large customer base. ServiceNow was praised for fast growth tied to automation and security demand.
Braze has lost nearly a third of its value this year. Oppenheimer said the stock now offers one of the better risk to reward setups in the sector.
ServiceNow shares are down about 15% so far this year. Microsoft shares are up around 6%, trailing the S&P 500’s 13% gain over the same stretch.
Cramer said the fourth quarter will likely hinge on interest rate moves and upcoming earnings reports from software companies.
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