🚨 Unlocking Q3’s Cash Windows 🚨
Many of the biggest double- and triple-digit opportunities in Q3 will fly under the radar, which is why I’m giving away my Free Ride Scanner at no cost today to help you flag the market’s biggest cash windows live [Tune in Right Here Now]
Software stocks have been getting hammered since February and March — right around the time everyone decided AI was going to replace everything.
Turns out, that didn’t work out quite like planned.
I’ve been tracking this rotation for weeks. After a brutal sell-off that slammed the sector all through June, we are finally seeing signs of a capitulation bottom.
Now we’re seeing the move play out in real time across names like MongoDB (MDB), CrowdStrike (CRWD), Palo Alto Networks (PANW), Fortinet (FTNT) and Datadog (DDOG).
Here’s what happened — companies thought they could fire employees and cancel their enterprise software subscriptions because AI would handle it all.
The problem — AI tokens cost more than the employees and the software subscriptions when deployed at scale. When the math finally hit, software stocks started showing signs of a tactical bounce because the market realized these businesses still depend heavily on human capital.
These names were sold off on an assumption that didn’t hold up.
Maybe Coca-Cola actually does need to pay for the enterprise version of software — they can’t just do it on their own when the total operational costs of raw AI are running that high.
Software companies themselves realized something important — they can’t fire every employee because employees actually come out cheaper than unoptimized AI tokens.
So after months of being sold off exceptionally hard, the sector is hammering out a major reversal. The Expanded Tech-Software Sector (IGV) just staged a massive single-day capitulation bounce off its late-June lows, and individual names are starting to move.
Where the Upside Lives
ServiceNow (NOW) is a deeply discounted laggard that probably has the most upside to go from here as it attempts to reclaim its spring levels. There are good entries across the board if you’re watching for them.
I’m also keeping an eye on option flows. Datadog (DDOG) just saw heavy institutional call volume hitting the $260 and $275 strikes — that’s a meaningful vote of confidence after the beating these names took and a strong indication that institutional traders are positioning for a rebound.
One more name worth watching — Reddit (RDDT).
They didn’t make a dime for years but now they’re printing money hand over fist. Their quarterly revenues are skyrocketing up 69% year-over-year and their costs aren’t increasing along with those revenues because it’s all user-generated content. Their elite 91.5% gross margins prove it.
How I’m Watching This Play Out
This isn’t about chasing headlines — it’s about recognizing a sector that got oversold on a thesis that didn’t pan out — and now reality is setting in.
I’m looking for good entries on these names and tracking institutional flow. When you see aggressive call buying hitting a hammered name like DDOG at strikes well above current prices, that’s worth noticing.
Software was left for dead. Now it’s waking up. And the reason isn’t hype — it’s math. Companies ran the numbers and realized they still need enterprise SaaS and they still need people.
Keep your eyes on these names as they continue to build momentum off these recent lows. The move is early, not late.
To better trading,
Alex Reid
WealthPin
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