Software stocks rallied sharply on Tuesday, extending a rebound in a sector that had come under intense pressure this year amid concerns that artificial-intelligence agents could threaten traditional enterprise software providers.
In US, shares of enterprise software companies moved broadly higher, with ServiceNow (NOW) leading gains after a strong rally in the previous session.
The stock rose more than 5.6% after climbing 8% on Monday, marking its strongest one-day performance in over a year.
Salesforce gained over 3.6%, while Workday advanced about 4.75%.
Intuit also traded more than 4% higher.
The gains came as investors shifted away from semiconductor and hardware stocks that had driven much of the technology rally earlier this year, instead rotating into software companies whose valuations had been battered in recent months.
European software firms join the rally
The recovery was also visible in Europe, where software shares outperformed the broader market.
German software giant SAP climbed 6.2%, while French IT consulting group Capgemini gained 5%.
Dutch information-services provider Wolters Kluwer rose 3.8%, and German construction-software specialist Nemetschek surged 11%.
The latest rally marked a notable shift in sentiment for a sector that had been heavily sold off earlier this year as investors questioned whether generative AI tools and autonomous agents would reduce the need for conventional enterprise software.
Wall Street turns optimistic on ServiceNow
However, renewed optimism from Wall Street helped spark the latest rebound.
Analysts at Bank of America on Monday reinstated coverage of ServiceNow with a buy rating and a $130 price target, arguing that the company could emerge as a beneficiary of the AI transition rather than a casualty of it.
ServiceNow had previously contributed to the weakness in the sector after a disappointing earnings report raised concerns about slowing customer spending and the broader outlook for software demand.
Its shares have still fallen roughly 34% since the start of the year.
Bank of America analyst Tal Liani said ServiceNow’s role inside corporate workflows positions it to help companies govern and monitor AI agents operating across organizations.
He described the company as serving a “mission-critical” function in providing compliance controls and business rules for AI-driven systems.
Liani also pointed to the company’s transition from a traditional seat-based pricing structure to a hybrid model linked partly to AI consumption.
According to the analyst, executives expect customers moving into higher-tier AI bundles to face average price increases of 20% to 30%.
Recent acquisitions, including cybersecurity companies Armis and Veza, were also cited as strengthening ServiceNow’s AI-focused offerings and expanding its market opportunity.
Investors rotate away from chipmakers
Investors meanwhile continued to trim exposure to semiconductor shares following a strong run earlier this year.
The iShares Semiconductor ETF has fallen 7.2% over the last two sessions, marking its worst two-day decline since April 2025.
Janus Henderson portfolio manager Ana Chkhikvadze said the pullback in semiconductors and hardware was helping software stocks outperform on a relative basis.
Tikehau Capital’s Raphael Thuin added that lower valuations following the earlier selloff had made software companies increasingly attractive, particularly as many firms appeared to be adapting more aggressively to the rapid rise of AI technologies.
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