Why Wedbush’s AI List Flip Signals a Massive Software Upside

• Wedbush reinstates Salesforce (CRM) and ServiceNow (NOW) on its AI‑focused watchlist, reversing a December exclusion.
• The analyst calls the recent software sell‑off an overreaction, not a fundamental flaw.
• Sector momentum: AI‑driven cloud spend is still accelerating, with enterprise budgets re‑allocating toward automation.
• Historical parallels suggest a 15‑25% upside for heavyweights after similar panic‑selling cycles.
• Strategic entry points emerge around key technical levels and earnings windows.

You missed the biggest software rebound of the year.

Dan Ives, managing director at Wedbush Securities, just announced that Salesforce and ServiceNow are back on his IVES AI 30 roster. After stripping them out in December amid a market‑wide tech pull‑back, Ives now argues the drop was a short‑term over‑reaction, not a sign of structural decay. For investors, that pronouncement is a loud alarm bell: the two cloud giants may be poised for a fresh rally, especially as AI‑powered workloads explode across the enterprise.

Why Salesforce’s Margin Drop Matches Sector Trends

Salesforce reported a modest decline in operating margin last quarter, a metric that many read as a warning sign. However, the drop aligns with a broader industry pattern where firms are deliberately investing heavily in AI R&D and expanding platform ecosystems. The marginal compression is a temporary cost of building generative‑AI features that can command higher subscription fees later. Historically, a similar margin dip in 2018 preceded a 22% stock surge once new AI‑centric products hit the market.

ServiceNow’s Growth Narrative vs Peer Landscape

ServiceNow’s revenue growth outpaced peers like Workday and Atlassian, yet the stock fell on the same market shock that took down the whole cloud cohort. Unlike its rivals, ServiceNow’s platform is embedded in IT service management (ITSM) and is now extending into HR and security workflow automation—areas where AI can deliver immediate efficiency gains. Analysts estimate a 30‑40% total addressable market (TAM) expansion by 2028, dwarfing the more modest outlook for traditional SaaS players.

Historical Echoes: 2018 Cloud Software Sell‑off

In late 2018, a wave of profit‑taking swept through the SaaS sector after a series of earnings misses. Companies such as Adobe and Microsoft saw their shares dip 12‑18% in a matter of weeks. Those investors who held through the dip captured an average 28% upside in the following twelve months as AI‑enhanced product suites launched. The pattern repeats: panic‑driven sell‑offs create buying opportunities for high‑quality, cash‑rich platforms.

Technical Signals: Moving Averages and Volume

From a chart perspective, both CRM and NOW have crossed above their 50‑day simple moving averages (SMA) while staying above the 200‑day SMA, forming a classic “golden cross” that historically precedes 3‑6 month uptrends. Volume has also spiked 45% above the 30‑day average, indicating institutional accumulation. The Relative Strength Index (RSI) sits at 55 for CRM and 58 for NOW—well below overbought territory, suggesting room for upside.

Investor Playbook: Bull and Bear Scenarios

Bull Case

• AI integration accelerates, boosting subscription ARR (annual recurring revenue) at double‑digit rates.
• Enterprise budgets re‑allocate from legacy on‑prem tools to cloud platforms, driving top‑line growth.
• Quarterly earnings beat expectations, triggering a short‑cover rally and renewed analyst upgrades.
• Target price: CRM $250 (+30% from current), NOW $560 (+28%).

Bear Case

• Macroeconomic headwinds tighten corporate spending, slowing AI adoption cycles.
• Regulatory scrutiny on data privacy curtails expansion in key regions (EU, APAC).
• Missed AI product milestones lead to revenue guidance cuts.
• Support levels: CRM $190, NOW $420; breach could trigger further downside.

For the risk‑adjusted investor, a phased entry—starting with a small position at current levels and scaling up on a pull‑back to the 200‑day SMA—captures upside while limiting exposure. Keep an eye on upcoming earnings (Q2 for Salesforce, Q3 for ServiceNow) and any major AI partnership announcements, which often act as catalysts.

In short, Wedbush’s reversal isn’t just a name‑drop; it’s a strategic signal that the AI‑infused cloud software sector is about to rebound. Missing this move could mean forfeiting a multi‑digit gain in a market that’s already rewarding the few who see beyond headline volatility.