Software stocks rebounded sharply on Friday, with ServiceNow, Inc. rising nearly 10% and extending gains in overnight trading, as investors took profits from red-hot chip stocks and weighed reports that OpenAI may delay its initial public offering. Workday gained 9.2% and Datadog rose 8.5%, while Microsoft advanced 5.8%, Salesforce climbed 5.5%, Intuit increased 5%, and Adobe gained 4.8%. The rally followed the New York Times reporting on Thursday, citing sources, that OpenAI may push its IPO to next year partly due to financial challenges, easing concerns that AI tools from OpenAI and rival Anthropic would rapidly displace specialized software providers.
ServiceNow and Microsoft extended gains of about 2% in overnight trading. U.S. inflation rose above 4% in May, data showed on Thursday, as war in Iran drove up energy prices.
Chip Stocks Decline as Software Stocks Advance
Investors appeared to take profits in chip stocks following Micron's quarterly report on Wednesday and the rally in memory and semiconductor shares that followed the next day. The iShares Semiconductor ETF declined 5.6% on Friday.
The New York Times reported on Thursday, citing sources, that OpenAI may delay its IPO until next year, partly due to financial challenges. Advances by OpenAI and rival Anthropic have been among the key drivers of software stocks' underperformance, amid concerns that AI tools could take over specialized tasks long handled by niche software providers.
Oracle, whose future business is tied to OpenAI through its $300 billion deal, closed 3% lower on Friday. Analysts and investors had maintained for months that several software stocks were undervalued relative to their fundamentals.
Retail Sentiment Data from Stocktwits
On Stocktwits, retail sentiment was 'neutral' for ServiceNow, Workday, and the iShares Expanded Tech-Software Sector ETF, 'bearish' for Adobe, and 'bullish' for Salesforce.
One trader stated that Salesforce may target 190+ and Microsoft 425+ in the first two weeks of July, adding that software, banking, and pharma sectors may perform well while memory and chips enter correction mode. Microsoft shares are down 22.5% year to date.
Another wrote that the iShares Expanded Tech-Software Sector ETF is "too predictable now" with rotation back and a retest at the 200 weekly level. The ETF is down 16.5% in the same period, compared to a 7.4% gain in the S&P 500 index.
FAQ
What caused software stocks to rebound on Friday?
Software stocks rebounded sharply on Friday as investors took profits from chip stocks and weighed reports that OpenAI may delay its initial public offering. ServiceNow rose nearly 10%, Workday gained 9.2%, and Datadog increased 8.5%.
What did the New York Times report about OpenAI's IPO?
The New York Times reported on Thursday, citing sources, that OpenAI may delay its IPO until next year, partly due to financial challenges. The report eased concerns that AI tools would rapidly displace specialized software providers.
