JPMorgan Sees Buying Opportunity in Software Stocks After Historic Drawdown
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 10 2026
0mins
Source: CNBC
- Market Drawdown Analysis: JPMorgan highlights that the software sector has experienced the largest non-recessionary 12-month drawdown in over 30 years, with a market capitalization loss of $2 trillion, reducing its weight in the S&P 500 from 12% to 8.4%.
- Investment Opportunity Identification: Despite the turmoil caused by AI threats, JPMorgan believes the market has overreacted, with current valuations reflecting worst-case scenarios that are unlikely to materialize, especially in the next three to six months.
- Short-term Trading Strategy: The strategist notes that short interest in software stocks is at record levels, while a preference for AI semiconductors skews the risk balance towards an imminent rebound, prompting a recommendation for investors to increase exposure to high-quality software companies.
- Recommended Stock List: JPMorgan's rebound candidates include Microsoft, Snowflake, CrowdStrike, Zscaler, and ServiceNow, with Microsoft showing little change over the past 12 months but down 14% in 2026.
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Analyst Views on SNOW
Wall Street analysts forecast SNOW stock price to rise
33 Analyst Rating
30 Buy
3 Hold
0 Sell
Strong Buy
Current: 239.200
Low
237.00
Averages
278.19
High
312.00
Current: 239.200
Low
237.00
Averages
278.19
High
312.00
About SNOW
Snowflake Inc. is an artificial intelligence (AI) data cloud company. The Company provides a platform which powers the AI data cloud, enabling customers to consolidate data into a single source of truth to drive insights, apply AI to solve business problems, build data applications, and share data and data products. Its cloud-native architecture includes three independently scalable but logically integrated layers across storage, compute, and cloud services. The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data. The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency. The cloud services layer enables users to securely use AI within applications, tools, and processes. Its platform supports a wide range of product categories for customers’ business objectives, including analytics, data engineering, AI, applications and collaboration.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
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- Customer Base Expansion: The company saw a 38% year-over-year increase in new customers, adding eight clients spending over $10 million annually, bringing the total to 64, demonstrating success in attracting high-value clients and enhancing future revenue sustainability.
- Improved Profitability: Adjusted earnings per share (EPS) surged 63% year-over-year to $0.39, reflecting successful cost control and operational efficiency improvements, which bolster investor confidence in its long-term growth potential.
- Optimistic Outlook: Snowflake raised its full-year product revenue forecast to $5.84 billion, representing 31% growth, and projected Q2 product revenue between $1.415 billion and $1.420 billion, showcasing confidence in future performance despite a valuation of 14 times forward price-to-sales.
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See More
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See More
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- Japanese Market Uptrend: Nikkei 225 futures traded at 66,405, up from the previous close of 66,329.5, indicating investor optimism about Japan's economic outlook.
- Slight Gains in Australia: S&P/ASX 200 futures were at 8,737, slightly above the last close of 8,731.7, reflecting confidence in economic recovery among investors.
- Pressure on Hong Kong Market: Hang Seng index futures traded at 25,098, lower than the previous close of 25,182.39, indicating a cautious sentiment among investors, likely influenced by international developments.
See More
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- Significant Customer Growth: The company added 616 net new customers, a 38% increase year-over-year, while net revenue retention rose from 125% to 126%, reflecting customer trust in the Snowflake platform and laying a solid foundation for future revenue growth.
- Improved Profitability: Snowflake's non-GAAP operating margin expanded from 9% to 12%, with adjusted earnings per share rising from $0.24 to $0.39, demonstrating that the company is enhancing profitability alongside rapid growth, boosting market confidence.
- Strategic Partnership Expansion: The company signed a new $6 billion five-year agreement with Amazon AWS and expanded its partnership with OpenAI, further solidifying its market position in the AI sector and indicating strong growth potential ahead.
See More
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- Accelerated Revenue Growth: Snowflake's latest fiscal quarter saw product revenue grow 34% year-over-year to $1.33 billion, accelerating from 30% in the previous quarter and 26% a year earlier, indicating a strong performance amidst the AI boom that could reshape market perceptions of software companies' futures.
- Significant Customer Growth: The company added 616 net new customers, a 38% increase year-over-year, while net revenue retention rose from 125% to 126%, demonstrating increased usage of the Snowflake platform among existing clients, which enhances market competitiveness and customer loyalty.
- Improved Profitability: Snowflake's non-GAAP operating margin expanded from 9% to 12%, with adjusted earnings per share rising from $0.24 to $0.39, reflecting the company's ability to improve profitability alongside revenue growth, thereby boosting investor confidence.
- Optimistic Outlook: Management raised its full-year product revenue guidance to $5.84 billion, or 31% growth, and signed a new $6 billion five-year agreement with Amazon AWS, indicating strong confidence in future demand and further solidifying its leadership position in the AI space.
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