Software stocks have dropped into a bear market due to concerns about AI, but Nvidia CEO Jensen Huang says the market’s reaction has been “illogical.” Microsoft’s generative AI copilots are gaining traction with customers, and the company is gaining market share in cloud computing. ServiceNow’s dominance in IT software positions the company as a likely beneficiary as enterprise adoption of AI tools increases. The S&P North American Technology Software Index, which tracks 111 software stocks, has fallen 30% from the all-time high it hit in September due to worries about AI tools reducing demand for existing products.

Microsoft enjoys a strong position in enterprise software, particularly in office productivity and cloud computing. The company’s generative AI assistants have boosted productivity, with paid Microsoft 365 Copilot seats rising by 160% in the December quarter. Microsoft Azure has gained market share in cloud computing, accounting for 21% of cloud infrastructure and platform services spending in the December quarter.

ServiceNow is a market leader in IT software, offering automation solutions for various workflows. The company is recognized for its AI applications in IT service management and has reported strong financial results, with revenue climbing 20% in the fourth quarter. Analysts estimate ServiceNow’s adjusted earnings will increase by 18% over the next year, making it an attractive investment opportunity.

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