Dan Ives: Software earnings deliver clearest buy signal

Dan Ives, partner and senior managing director at Yorkville Ives, called recent software earnings, led by Oracle’s quarter, the clearest buy signal for the sector in months. He urged institutional investors to begin rotating into companies such as Oracle, Adobe, Palantir and Snowflake.

Ives identified Oracle’s latest quarter as a turning point after months of underperformance tied to concerns about AI-driven spending shifts and execution risks. He pointed to a string of better-than-expected results across multiple software firms as evidence the trend is appearing broadly across the trade rather than at a single company.

Ives argued Wall Street has underpriced Oracle’s backlog, noting many investors treated a large portion as unlikely to convert to revenue. He said some models assumed a 50% to 60% chance that the backlog never converts. Conversion, he added, depends on Oracle building enough data-center capacity to meet demand from cloud and AI customers; the timing and scale of that build-out will affect how quickly backlog turns into recognized sales.

He cautioned that one strong quarter will not secure a full re-rating. Ives labeled Oracle a “penalty box stock” and added the company must show sustained execution in coming quarters before it receives broader investor credit.

Ives contrasted the software view with semiconductors, expressing firmer confidence in chip demand. He pointed to a roughly 13-to-1 demand-to-supply ratio in Asian chip markets and said that dynamic leaves some chipmakers better positioned than others. He identified Nvidia as relatively safer than AMD or Intel as those rivals work to close market and technology gaps, and noted investor sentiment around chip demand can shift sharply on signs of slowing orders.

Ives stopped short of declaring an outright buy for the whole software sector. He described the setup as “It’s like a lime green actually,” and said whether that color deepens will depend on continued positive results and clearer evidence that backlog conversion and capacity build-outs are proceeding as expected.