JPMorgan Sees Buying Opportunity in Software Stocks After Historic Drawdown
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 10 2026
0mins
Should l Buy SNOW?
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: 176.080
Low
237.00
Averages
278.19
High
312.00
Current: 176.080
Low
237.00
Averages
278.19
High
312.00
About SNOW
Snowflake Inc. is a data cloud and artificial intelligence company. Its platform is the technology that powers the AI Data Cloud, enabling customers to consolidate data into a single source of truth to drive meaningful insights, apply artificial intelligence (AI) to solve business problems, build data applications, and share data and data products. It provides its platform through a customer-centric, and consumption-based business model. Its cloud-native architecture consists of three independently scalable but logically integrated layers across compute, storage, and cloud services. The compute layer provides dedicated resources to enable users to simultaneously access common data sets for many use cases with minimal latency. The storage layer ingests massive amounts and varieties of structured, semi-structured, and unstructured data to create a unified data record. Its ClearQuery platform allows users to rapidly search, explore, and analyze their data using natural language queries.
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.
Snowflake Consumption Trends Show Positive Uptick
- Consumption Trend Recovery: Wells Fargo's survey indicates an uptick in Snowflake's consumption trends among large customers compared to Q3, with spending growth expected between 10% and 25% next year, marking the most positive read in five quarters and suggesting increasing demand in the market.
- Increased AI Investment: The survey highlights a growing intention among customers to spend on Snowflake for AI-related initiatives, particularly in generative AI strategies, indicating the company's strengthening competitiveness in emerging technologies that could further drive revenue growth.
- Market Share Gains: Customers using competitor Databricks plan to increase their spending on Snowflake over the next two years, demonstrating a rising position for Snowflake in customer preferences and enhancing its competitive edge in the market.
- Optimistic Earnings Expectations: Snowflake is set to report its fourth-quarter results on February 25, with analysts expecting an adjusted earnings per share of $0.27 and revenue of $1.26 billion, reflecting market confidence in its future performance.
See More
Analysis of the Reasons Behind Software Stock Pullback
- Market Sentiment Shift: In 2025, Palantir Technologies has seen its stock price drop about 22%, while Adobe, Salesforce, and ServiceNow have all slid between 25% and 30%, indicating increasing investor concerns about software stocks despite strong performance reports from these companies.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have run ahead of their underlying fundamentals, leading to a market reassessment of these high-valuation stocks, which could further depress prices.
- Misunderstanding of AI Impact: While AI is viewed as a potential disruptive force, analysis suggests that its application is actually helping incumbents enhance their competitive advantages rather than simply threatening their market positions, indicating that market fears regarding AI may be misguided.
- Long-Term Growth Potential: Despite Palantir's stock price decline year-to-date, it has risen over 80% since the beginning of 2025, reflecting strong revenue growth and profitability, suggesting market recognition of its long-term growth potential.
See More
Underlying Reasons for Software Stock Sell-off
- Market Sentiment Shift: In 2026, Palantir Technologies' stock has dropped about 22%, while shares of Adobe, Salesforce, and ServiceNow have slid between 25% and 30%, indicating a growing panic among investors despite these companies reporting strong results.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have seen their valuations exceed underlying fundamentals, prompting a market reassessment that has led to recent sell-offs.
- Misunderstanding AI's Impact: While investors fear AI's potential to disrupt the software industry, companies like Palantir and ServiceNow possess complex integrations that make it difficult for competitors to replicate their software, suggesting AI may actually enhance their competitive advantages.
- Uncertain Future Trajectory: Although the current sell-off in software stocks may be justified, the market must remain cautious of valuation risks, particularly with high price-to-sales ratios in companies like Snowflake, CrowdStrike, and Shopify, which could indicate further downside potential.
See More
Mistral AI CEO: AI to Reshape Software Market Dynamics
- AI Replacement Trend: Mistral AI CEO Arthur Mensch stated that over 50% of current enterprise software could be replaced by AI, raising investor concerns about software stocks, particularly as SaaS models face disruption.
- Shift in SaaS Spending: Mensch predicts that more than half of SaaS spending in IT procurement will shift to AI, indicating a qualitative leap in software development speed, which could put traditional software companies under greater pressure.
- Changing Customer Demands: Mistral AI currently has over 100 enterprise customers looking to replatform their IT systems to enhance efficiency and reduce costs, presenting significant market opportunities for the company.
- Expansion into India: Mistral AI plans to open its first office in India and collaborate with local companies, aligning with the Indian government's push for AI localization, which is expected to provide strong growth momentum for the company in the region.
See More
US Stocks Edge Up Amid Ongoing AI Concerns
- Market Volatility: The S&P 500 rose 0.10% to 6,843.22, reflecting ongoing AI-related concerns that pressured growth stocks, indicating investor uncertainty about future market conditions.
- Tech Stock Performance: Amazon ended its historic slide with a 1.19% increase, while Apple and GE Aerospace rose 3.12% and 3.61%, respectively, providing support to the Dow, highlighting investor preference for value stocks amid volatility.
- Consumer Goods Pressure: Consumer staples and packaged food stocks faced challenges as investors expressed concerns that a softening U.S. consumer could impact margins and earnings in defensive sectors, signaling caution in the market.
- Investment Strategy Shift: JPMorgan noted that select quality stocks appear mispriced post-AI rerating, suggesting investors are increasingly focusing on moats and regulatory factors while positioning for upcoming inflation and GDP releases.
See More
Goldman Sachs: Software Stocks Still Have Potential
- Market Reaction Analysis: Goldman Sachs notes that despite the recent turmoil in the software sector, some software companies remain significantly oversold in the S&P 500, indicating that market confidence in these firms persists.
- AI Technology Impact: Analyst Gabriela Borges highlights that the rapid evolution of AI tools poses challenges to traditional software companies' per-seat subscription models, yet existing Systems of Record remain crucial data reservoirs for AI models.
- Investment Opportunity Identification: Goldman emphasizes that software companies with clear architectural moats, such as Snowflake, MongoDB, Shopify, and CrowdStrike, can thrive amid fears of AI disruption, showcasing stable fundamentals and growth potential.
- Stock Price Potential Assessment: Analysts project that Shopify shares have approximately 43% upside potential, while MongoDB, despite a 17% year-to-date decline, is expected to gain over 28%, reflecting optimistic market expectations for these companies.
See More
Snowflake Consumption Trends Show Positive Uptick
- Consumption Trend Recovery: Wells Fargo's survey indicates an uptick in Snowflake's consumption trends among large customers compared to Q3, with spending growth expected between 10% and 25% next year, marking the most positive read in five quarters and suggesting increasing demand in the market.
- Increased AI Investment: The survey highlights a growing intention among customers to spend on Snowflake for AI-related initiatives, particularly in generative AI strategies, indicating the company's strengthening competitiveness in emerging technologies that could further drive revenue growth.
- Market Share Gains: Customers using competitor Databricks plan to increase their spending on Snowflake over the next two years, demonstrating a rising position for Snowflake in customer preferences and enhancing its competitive edge in the market.
- Optimistic Earnings Expectations: Snowflake is set to report its fourth-quarter results on February 25, with analysts expecting an adjusted earnings per share of $0.27 and revenue of $1.26 billion, reflecting market confidence in its future performance.
See More
Analysis of the Reasons Behind Software Stock Pullback
- Market Sentiment Shift: In 2025, Palantir Technologies has seen its stock price drop about 22%, while Adobe, Salesforce, and ServiceNow have all slid between 25% and 30%, indicating increasing investor concerns about software stocks despite strong performance reports from these companies.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have run ahead of their underlying fundamentals, leading to a market reassessment of these high-valuation stocks, which could further depress prices.
- Misunderstanding of AI Impact: While AI is viewed as a potential disruptive force, analysis suggests that its application is actually helping incumbents enhance their competitive advantages rather than simply threatening their market positions, indicating that market fears regarding AI may be misguided.
- Long-Term Growth Potential: Despite Palantir's stock price decline year-to-date, it has risen over 80% since the beginning of 2025, reflecting strong revenue growth and profitability, suggesting market recognition of its long-term growth potential.
See More
Underlying Reasons for Software Stock Sell-off
- Market Sentiment Shift: In 2026, Palantir Technologies' stock has dropped about 22%, while shares of Adobe, Salesforce, and ServiceNow have slid between 25% and 30%, indicating a growing panic among investors despite these companies reporting strong results.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have seen their valuations exceed underlying fundamentals, prompting a market reassessment that has led to recent sell-offs.
- Misunderstanding AI's Impact: While investors fear AI's potential to disrupt the software industry, companies like Palantir and ServiceNow possess complex integrations that make it difficult for competitors to replicate their software, suggesting AI may actually enhance their competitive advantages.
- Uncertain Future Trajectory: Although the current sell-off in software stocks may be justified, the market must remain cautious of valuation risks, particularly with high price-to-sales ratios in companies like Snowflake, CrowdStrike, and Shopify, which could indicate further downside potential.
See More
Mistral AI CEO: AI to Reshape Software Market Dynamics
- AI Replacement Trend: Mistral AI CEO Arthur Mensch stated that over 50% of current enterprise software could be replaced by AI, raising investor concerns about software stocks, particularly as SaaS models face disruption.
- Shift in SaaS Spending: Mensch predicts that more than half of SaaS spending in IT procurement will shift to AI, indicating a qualitative leap in software development speed, which could put traditional software companies under greater pressure.
- Changing Customer Demands: Mistral AI currently has over 100 enterprise customers looking to replatform their IT systems to enhance efficiency and reduce costs, presenting significant market opportunities for the company.
- Expansion into India: Mistral AI plans to open its first office in India and collaborate with local companies, aligning with the Indian government's push for AI localization, which is expected to provide strong growth momentum for the company in the region.
See More
US Stocks Edge Up Amid Ongoing AI Concerns
- Market Volatility: The S&P 500 rose 0.10% to 6,843.22, reflecting ongoing AI-related concerns that pressured growth stocks, indicating investor uncertainty about future market conditions.
- Tech Stock Performance: Amazon ended its historic slide with a 1.19% increase, while Apple and GE Aerospace rose 3.12% and 3.61%, respectively, providing support to the Dow, highlighting investor preference for value stocks amid volatility.
- Consumer Goods Pressure: Consumer staples and packaged food stocks faced challenges as investors expressed concerns that a softening U.S. consumer could impact margins and earnings in defensive sectors, signaling caution in the market.
- Investment Strategy Shift: JPMorgan noted that select quality stocks appear mispriced post-AI rerating, suggesting investors are increasingly focusing on moats and regulatory factors while positioning for upcoming inflation and GDP releases.
See More
Goldman Sachs: Software Stocks Still Have Potential
- Market Reaction Analysis: Goldman Sachs notes that despite the recent turmoil in the software sector, some software companies remain significantly oversold in the S&P 500, indicating that market confidence in these firms persists.
- AI Technology Impact: Analyst Gabriela Borges highlights that the rapid evolution of AI tools poses challenges to traditional software companies' per-seat subscription models, yet existing Systems of Record remain crucial data reservoirs for AI models.
- Investment Opportunity Identification: Goldman emphasizes that software companies with clear architectural moats, such as Snowflake, MongoDB, Shopify, and CrowdStrike, can thrive amid fears of AI disruption, showcasing stable fundamentals and growth potential.
- Stock Price Potential Assessment: Analysts project that Shopify shares have approximately 43% upside potential, while MongoDB, despite a 17% year-to-date decline, is expected to gain over 28%, reflecting optimistic market expectations for these companies.
See More
