This article first appeared on GuruFocus.
The Magnificent Seven and broader technology sector are likely to benefit from a risk-on environment following the Iran ceasefire, according to an client note from Wedbush.
Analysts said the overnight ceasefire news represents a major positive development for overall markets. The firm believes the nervous geopolitical backdrop of recent months has created an oversold tech environment for the Magnificent Seven, software names and AI-related winners, the note showed.
The sell-off in software stocks appears overblown, Wedbush added. Many companies are integrating artificial intelligence across their technology stacks rather than replacing products and services.
Investor concerns that Anthropic, OpenAI and other AI incumbents may shift toward becoming enterprise software infrastructure players are likely a stretch, according to the firm. After speaking with chief information officers across the industry, Wedbush said the core focus on revenue generation will center on partnering around AI workflows.
The firm believes the bottoming process in software stocks is likely in the rear-view mirror. Microsoft (NASDAQ:MSFT), Salesforce and ServiceNow stand out as having disconnected selloffs relative to their AI monetization opportunities over the coming years, the note added.