The industry's rebound began in May following better than expected results from heavyweights such as AppLovin, Constellation Software, ServiceNow, and various cybersecurity giants. Salesforce also surprised to the upside last week, announcing a massive $25bn capital return to shareholders alongside its first-quarter earnings report.

The momentum appears to be accelerating this Monday following comments from Nvidia CEO Jensen Huang, who stated that this is "a great time for a software company," while noting that software "must be presented to the [AI] agent in a way that it can use it."
On a technical level, the IGV ETF recently formed an "inverse head and shoulders" pattern, which, in the language of technical analysts, suggests the beginning of a major bullish reversal. Since its mid-April low, the IGV ETF has risen as much as the SOX semiconductor index (+40%).

Valuations, however, remain starkly different: the software segment is trading at approximately 20:21 times forward earnings, or two standard deviations below its ten-year average, while the semiconductor segment trades at 29 times forward earnings, representing two standard deviations above its ten-year average.

Despite a nearly 40% increase in two months, there appears to be significant potential for further re-rating within the software compartment. Much will depend, however, on the ability of these companies to prove that AI is an asset rather than a threat to their business models.