The S&P 500 software sub-index has recovered from early-year losses, now broadly flat despite initial fears that AI would render software obsolete. Investors fled the sector too fast, but a resurgence is underway led by major players integrating artificial intelligence. Salesforce reported one of its best quarters ever, highlighting AI as a key beneficiary, with AI-driven products generating over $1.5bn in annual recurring revenue.

Snowflake added 2,000 accounts to its coding assistant, surpassing 9,000 total users. Workday's AI agents are now used by more than 5,500 customers, up significantly quarter-over-quarter. The sector is innovating pricing models, shifting from flat user fees to usage-based billing.

This evolution suggests a "RenaiSaaS" phenomenon is more discriminating than the previous downturn. While share prices have broadly recovered, company valuations remain subdued except for high-growth names like Snowflake. Salesforce and Workday trade at more reasonable mid-teen forward earnings multiples.

Cybersecurity firms like Fortinet and Crowd Strike are best positioned to maintain outperformance, while Adobe remains exposed to generative AI headwinds. Investor attitudes are maturing alongside the technology.