Software equities stand at an inflection point.
The sector trades at ~5x EV/Revenue—above its 10-year average—but the real signal is the gap: top-growth names fetch 33x sales while most sit at 4–8x.
With attention crowded into AI hardware, much of software has been left behind.
These extremes rarely last—flows could rotate into the software stack in H2 2025, and we break down 4 names best positioned.
Source: @jaminball
Key Report Insights:
Software rerating looms – sector multiples still above 10Y mean
AI boosts SaaS – workflows enhanced, not replaced by models
Premiums concentrate – top growth trades at 33x vs 5x sector median
Emerging names pop – DUOL & RDDT show high DAU/revenue torque
Cycle favors software – hardware stretched, rotation window opening
1. Software Macro Dynamics:
A. Cyclicality Of Software:
Hardware and software valuations move in cycles.
After a long decline through the 2010s, COVID sparked a software boom before AI infrastructure shifted leadership to hardware.
On current trajectory, another rotation could arrive by late 2025–early 2026—setting up a re-rating window for software.
Source: TradingView
B. Bitcoin Correlation:
Software stocks have tracked BTC unusually closely, with 52-week correlations nearing 90%.
Both act as high-beta growth proxies tied to rates and risk appetite.
BTC leads with sharper, leveraged moves, while software offers a steadier, fundamentals-anchored way to ride the same trade.
Source: @CalebFranzen
C. Capital Rotation & Spread Trades:
Software has trailed hardware as capital floods AI infrastructure, driving software vs. AI semi spreads to historic lows.
History suggests hardware leads in buildout, but monetization shifts back to software.
With ~$4T in market cap beyond Microsoft, incumbents won’t cede ground quietly—priming a re-rating as AI deployment takes hold.
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