What Happened?
A number of stocks jumped in the afternoon session after investors continued to rotate out of high-flying semiconductors into beaten-down software stocks.
DigitalOcean's blowout preliminary results also supported the improved appetite as it showed proof that AI demand is converting into real, contracted revenue. The clearest signal is at the index level: the iShares software ETF (IGV) climbed roughly 7% over eight sessions even as the semiconductor SOXX fell ~8.5%. Microsoft rose ~3% on the week (after launching its $2.5B "Frontier" AI-services unit). ServiceNow and Salesforce each gained around +4%.
DigitalOcean pre-announced that remaining performance obligations (RPO) would exceed $800M, more than 10x year-over-year and up over $550M in the quarter, driven by multiple new nine-figure AI inference contracts, with average contract life stretching from 1.6 to over three years. Revenue growth was guided to accelerate to ~29% (from a prior 24–25% guide), and margins to the high end. Coming after Q1's 221% jump in AI-customer ARR, it's hard evidence that AI spend is landing as durable, contracted backlog, not just usage that can evaporate.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Finance and Accounting Software company Workday (NASDAQ: WDAY) jumped 4%. Is now the time to buy Workday? Access our full analysis report here, it’s free.
- Communications Platform company Twilio (NYSE: TWLO) jumped 3.4%. Is now the time to buy Twilio? Access our full analysis report here, it’s free.
Zooming In On Workday (WDAY)
Workday’s shares are very volatile and have had 24 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 6 days ago when the stock gained 5.9% on the news that Guggenheim's John DiFucci upgraded both Salesforce and ServiceNow to Buy, arguing the AI-disruption fear that gutted the software sector during the year had pushed valuations too low.
This was a valuation call from a skeptic, not an AI endorsement. DiFucci wrote he is "not upgrading because we see [ServiceNow] as an AI beneficiary," calling near-term AI monetization "unlikely to materialize" and AI risks "very real," while arguing the darkest scenario was already priced in (CRM at ~3.7x EV/recurring revenue; NOW's $125 target at 7.5x EV/NTM recurring revenue).
The read-through was what lifted the group. When a previously cautious, highly ranked analyst flips to Buy on the two enterprise-SaaS bellwethers purely on valuation, it signals the "SaaSpocalypse" repricing overshot, de-risking the whole complex and inviting bargain-hunting across peers. Oracle's ~2% bounce added an independent second leg, driven by inclusion on William Blair's July Analyst Conviction List, a new AI product, and oversold conditions after the previous disclosure of a $40 billion AI-infrastructure raise. Together they extended a multi-week recovery.
Workday is down 30.2% since the beginning of the year, and at $143.62 per share, it is trading 42% below its 52-week high of $247.69 from September 2025. Investors who bought $1,000 worth of Workday’s shares 5 years ago would now be looking at only $601.79.
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