Oracle Corporation

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Bullish +75

DDOG, ORCL, MSFT emerge as top software stock picks as the sector rebounds: report

📈 The iShares Expanded Tech-Software Sector ETF (IGV) has surged nearly 42% from its April low after a severe selloff earlier in the year.

💻 Investors are shifting sentiment to view AI as a growth catalyst for software companies rather than a disruptive threat that destroys them.

🤖 Datadog (DDOG) is highlighted as the cleanest "AI-ready" pick due to its usage-based pricing model suited for AI data center monitoring and security.

📉 A key risk for Datadog is that slower real-world AI adoption could lead to disappointing usage-based revenue growth despite the positive narrative.

☁️ Microsoft (MSFT) is considered the safest long-term compounder with durable positioning in cloud infrastructure and Copilot monetization.

⚠️ The primary risk for Microsoft is if Copilot or Azure growth fails to translate into sustained revenue acceleration, breaking the AI monetization thesis.

🔄 Software stocks are recovering after a months-long decline as bargain hunters return following strong earnings from Snowflake and MongoDB.

💬 Nvidia CEO Jensen Huang argued at Computex that AI agents will use more tools than ever, making it an incredible time for software companies.

🛡️ Palo Alto Networks is favored by investors due to growing cybersecurity threat complexity supporting stronger pricing power for its defense solutions.

📊 Oracle has regained favor among investors after recovering from sharp losses, with analysts citing its large customer base as a strategic advantage.

💰 The sector rebound reflects a reassessment that AI remaps the industry rather than destroying traditional software functions entirely.

🚀 Datadog shares have nearly doubled this year and hit a record high after the company raised its annual outlook.

📈 Palo Alto Networks stock is up more than 57% for the year, having recently hit a record high despite a recent dip on Tuesday.

🔒 Analysts believe that as awareness of vulnerabilities increases, companies like Palo Alto will be able to charge higher prices for defense.

🏢 Microsoft's size and breadth ensure it remains "more than a survivor" in the evolving AI landscape according to senior strategists.

📉 The software rally accelerated last week after positive earnings reports and forecasts from key database and cloud companies improved sector confidence.

🤖 Usage-based pricing models are becoming increasingly important as businesses deploy AI tools that reduce the need for large traditional workforces.

🔍 Portfolio managers at firms like Synovus Trust and Janus Henderson are specifically citing Oracle, Microsoft, Datadog, and Palo Alto as preferred picks.

📉 The iShares ETF had previously fallen as much as 30% in early 2026 amid fears that AI could replace many traditional software functions.

🔄 The turnaround in the sector is described as swift, with enthusiasm lifting companies that successfully integrate AI into their offerings.

Bullish Signals
  • The iShares Expanded Tech-Software Sector ETF (IGV) has surged nearly 42% from its April low, signaling a strong sector rebound.
  • Oracle is highlighted as a preferred investment by analysts for its large customer base, which provides flexibility to refine its AI monetization strategy.
  • Datadog shares have nearly doubled this year and recently hit a record high after the company raised its annual outlook.
  • Palo Alto Networks hit a record high on Monday and is up more than 57% for the year, supported by growing cybersecurity threat complexity.
  • Nvidia CEO Jensen Huang delivered a bullish assessment of software demand at Computex, stating that AI agents will use more tools than ever.
  • Microsoft is viewed as one of the safest long-term AI bets with growth opportunities from its Copilot AI assistant and Azure cloud platform.
  • The software rally gained momentum after strong earnings reports and upbeat forecasts from Snowflake and MongoDB improved sector confidence.
  • Investors are increasingly gravitating toward companies adapting pricing structures to reflect actual usage, which fits the AI workload model better.
Risk Factors
  • The iShares Expanded Tech-Software Sector ETF (IGV) has fallen as much as 30% earlier in 2026 amid concerns that AI could replace many traditional software functions.
  • Oracle is specifically mentioned among top picks only after recovering from sharp earlier losses, indicating recent underperformance.
  • The sector's recovery reflects a shift in investor sentiment following a months-long selloff, suggesting prior pessimism about the industry.
Full Analysis
Oracle (ORCL) is highlighted as one of the preferred ways for investors to play the artificial intelligence theme alongside Microsoft and Datadog, following a significant sector rebound where the iShares Expanded Tech-Software Sector ETF has surged nearly 42% from its April low. Analysts note that Oracle has regained favor after recovering from earlier losses, with Marc Dizard, chief investment officer at Huntington National Bank, citing the company's large customer base as providing flexibility to refine its AI monetization strategy. This positive sentiment comes after a months-long selloff in software stocks and is reinforced by bullish comments from Nvidia CEO Jensen Huang at Computex, who argued that AI agents will use more tools rather than diminish the need for software applications. The broader recovery reflects a shift in investor sentiment as market participants reassess how software companies may benefit from AI adoption instead of being displaced by it, with the sector now down less than 2% for the year despite having fallen as much as 30% earlier in 2026. While investors are gravitating toward companies integrating AI into offerings and adapting pricing structures to reflect actual usage, Oracle is specifically mentioned among the top picks due to its established market position and potential for growth within the expanding AI landscape.