Software stocks wrap up best month since 2001 as talk of 'SaaSpocalypse' subsides

Concerns surrounding the so-called "SaaSpocalypse" may have eased for now, as software stocks experienced a remarkable upswing this week. Fueled by impressive earnings reports from companies like Snowflake and Okta, it appears that some firms are adeptly navigating the challenges posed by artificial intelligence disruption, surpassing Wall Street's expectations. The iShares Expanded Tech-Software exchange-traded fund (ETF) saw an 8% increase this week, culminating in a 21% rise for May. This represents the ETF's best monthly performance since October 2001, a time marked by a brief recovery during the dot-com crash. Today's rally, however, emerges amidst ongoing apprehensions about AI's impact on the industry. Over the past year, software companies have faced significant challenges due to the rapid rise of "vibe coding," which enables users to create applications and websites quickly, thanks to innovations from the likes of Anthropic and OpenAI. Despite this, the recent performance of the iShares software ETF shows a modest decline of just 3.8% for the year, particularly when compared to the Nasdaq's impressive 18% gain in 2026. Snowflake stood out this week, marking its best trading day ever on Thursday and witnessing nearly a 50% increase over the four trading days following the holiday. The company announced a substantial $6 billion deal with Amazon for cloud and chip services, coupled with an optimistic adjustment in its guidance as clients increasingly turn to AI solutions. CEO Sridhar Ramaswamy noted that customers are deploying and scaling workloads at an accelerated pace. In a report following the earnings call, analysts from Argus Research highlighted Snowflake as a crucial player in the generative AI landscape, raising their price target for the stock from $250 to $300. The stock closed Friday at $255.55, reflecting a 17% increase for the year, as analysts believe that Snowflake could benefit from the growing need for enterprises to unify their data in order to harness the advantages of generative AI. Okta also made headlines, soaring 30% on Friday after reporting results that exceeded expectations. The company indicated that the transition to agentic AI is compelling businesses to invest in identity security measures and bolster defenses against an influx of bot activities. Okta CEO Todd McKinnon emphasized that while AI product development may take time, every organization will inevitably need to establish and implement these agents as foundational infrastructure over the coming years. Other software firms enjoyed significant boosts as well, with Atlassian rising 26% for the week and ServiceNow climbing over 20%. Additionally, Shopify, Workday, and Asana all recorded gains of at least 14%. Among major players in the cloud infrastructure market, Oracle's stock rose by 16%, while Microsoft experienced an 8% increase, despite being down nearly 7% year-to-date, marking it as the worst performer among the top tech giants.