What Happened?

A number of stocks jumped in the afternoon session after investors appeared to rotate into oversold enterprise software names amid profit taking in chip stocks. 

While the Nasdaq retreated and semiconductor leaders like Micron (-4%) sold off, major SaaS incumbents caught a strong bid. ServiceNow (NYSE: NOW) surged 4.3%, and Salesforce (NYSE: CRM) climbed 2.4%. The divergence occurred against a backdrop of rising oil prices and geopolitical tensions in the Middle East that weighed on the broader indices. It seems the AI trade is rotating from the infrastructure layer to the application layer. After months of paying premium multiples for the chips required to build artificial intelligence, investors appeared to be shifting capital into the software companies that are actually monetizing it. 

Earlier in 2026, software stocks suffered a severe valuation compression, dubbed the "SaaSpocalypse", driven by fears that AI agents would destroy traditional per-seat software licensing models. Recent data points, including ServiceNow raising its Now Assist AI contract target to $1.5 billion and Salesforce scaling its Agentforce platform, revealed that incumbents can sell AI as a premium add-on rather than watching it cannibalize their core business. Because enterprise SaaS providers own the proprietary data and daily workflows, they are positioned as the control layer for AI deployment. With semiconductor valuations stretched to historic premiums, capital continued to hunt for the margin of safety found in quality software stocks with depressed forward multiples. 

However, risks remain: if macroeconomic pressures force enterprise CIOs to consolidate vendors further, second-tier software names without clear AI monetization could still struggle.

The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.

Among others, the following stocks were impacted:

• Data Infrastructure company Elastic (NYSE: ESTC) jumped 4.1%. Is now the time to buy Elastic? Access our full analysis report here, it’s free.
• Healthcare And Life Sciences Software company Veeva Systems (NYSE: VEEV) jumped 3.6%. Is now the time to buy Veeva Systems? Access our full analysis report here, it’s free.
• Endpoint Security company SentinelOne (NYSE: S) jumped 3.8%. Is now the time to buy SentinelOne? Access our full analysis report here, it’s free.

Zooming In On Elastic (ESTC)

Elastic’s shares are very volatile and have had 28 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The previous big move we wrote about was 12 days ago when the stock gained 3.3% on the news that Guggenheim's John DiFucci upgraded both Salesforce and ServiceNow to Buy, arguing the AI-disruption fear that gutted the software sector during the year had pushed valuations too low. 

This was a valuation call from a skeptic, not an AI endorsement. DiFucci wrote he is "not upgrading because we see [ServiceNow] as an AI beneficiary," calling near-term AI monetization "unlikely to materialize" and AI risks "very real," while arguing the darkest scenario was already priced in (CRM at ~3.7x EV/recurring revenue; NOW's $125 target at 7.5x EV/NTM recurring revenue). The read-through was what lifted the group. 

When a previously cautious, highly ranked analyst flips to Buy on the two enterprise-SaaS bellwethers purely on valuation, it signals the "SaaSpocalypse" repricing overshot, de-risking the whole complex and inviting bargain-hunting across peers. Oracle's ~2% bounce added an independent second leg, driven by inclusion on William Blair's July Analyst Conviction List, a new AI product, and oversold conditions after the previous disclosure of a $40 billion AI-infrastructure raise. Together they extended a multi-week recovery.

Elastic is down 13.9% since the beginning of the year, and at $62.48 per share, it is trading 33.9% below its 52-week high of $94.47 from November 2025. Investors who bought $1,000 worth of Elastic’s shares 5 years ago would now be looking at only $419.46.

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