The stock that jumped over 20% in a day and proved to investors they were wrong

Shares of major software companies on Wall Street recorded one of their strongest weeks in the past year, following a series of financial reports that refuted one of the most pessimistic assumptions prevalent in the market: that artificial intelligence is about to swallow the software industry.

Leading the pack was Salesforce (ticker: CRM), the customer relationship management software giant, whose stock jumped 22.6% on Thursday following a report that beat forecasts. Thanks to the jump, the iShares Expanded Tech-Software (IGV) index returned to positive yield for the year.

To understand the intensity of the reaction, one must return to the fear that accompanied the sector. The pessimistic logic was simple: as employees become more productive with AI tools, companies will need fewer employees — and therefore will buy fewer software subscriptions ("seats").

At the same time, the rise of "wave coding" (writing code with the help of artificial intelligence) promised that every business could build software for itself cheaply, without paying the big suppliers. The result: for about a year, software stocks traded under a heavy cloud.

Salesforce's data told the opposite story. The company's future revenue backlog (cRPO) grew by 14% compared to last year, and the value of new net annual orders reached the highest level in four years. The main message from management: the subscriptions that were supposed to shrink actually grew, including the Agentforce artificial intelligence service and the Slack platform.

For Michael Monahan, partner and portfolio manager at Founder ETFs, the report answered the company's "existential question." According to him, not only is Salesforce not losing subscribers — customers are even upgrading to more expensive premium packages. "The idea that AI would simply rewrite packaged software was probably not realistic," Monahan told MarketWatch.

The wave swept the entire sector. Workday (WDAY) stock rose 5.8% on Friday after subscription revenues were higher than expected, and management revealed that the company is approaching $600 million in annual recurring revenue from agent-based AI products — a jump from $500 million in the previous quarter. Cybersecurity company CrowdStrike (CRWD) reported its "best quarter in history," and ServiceNow (NOW) also jumped.

Nicholas Prass, an analyst at VanEck, warns against sweeping generalizations: "Not all SaaS companies are created equal," he said. According to him, established companies with a unique database — like Salesforce — are more resilient and may even benefit from the new technology more than they will be harmed by it.

Alongside the optimism, a cautious voice is rising. Jordan Klein, an analyst at Mizuho, argues that the recent rally stems more from institutional positioning than from a fundamental change in business foundations.

According to him, many hedge funds and investment managers were underweight in the software sector — partly due to fear of AI, and partly because software served as a source of funding for aggressive positions in chip and hardware stocks. When the trend reverses, the return to the sector feeds itself.

Klein estimates that the stocks may continue to climb in September and October, but qualifies that he would not "chase" Salesforce at the current price, and prefers names like ServiceNow and Microsoft (MSFT).

Most savers in Israel have indirect exposure to these companies: pension funds, advanced study funds, and provident funds hold American software stocks through indices like the S&P 500 and Nasdaq. After a year in which the fear of AI overshadowed the sector, this week provides a reminder that it is worth distinguishing between fears and actual numbers — but also that a rally driven by institutional positioning can be short-lived, and not every stock in the sector is entitled to the same degree of trust.