Software Giants Are Set to Capture AI’s Next Wave as Infrastructure Hype Cools
Chip stocks have owned the AI spotlight, but Wall Street thinks software is up next. Semiconductors surged 52% over the past year, while software rose just 8%, setting up a catch-up trade in MicrosoftMSFT, OracleORCL, and ServiceNowNOW, according to Goldman Sachs and Deutsche Bank. The thesis centers on AI finally moving past infrastructure spending and into real monetization through applications and orchestration.
- Goldman Sachs expects AI to expand software’s total addressable market by ~30% through 2037, with the next three years fueling a major revenue ramp for infrastructure software firms.
- Oracle’s deal pipeline has surged past $500B, and its Cloud Infrastructure business is hitting an “inflection point” as AI workload demand accelerates.
The orchestration opportunity: Goldman’s Gabriela Borges says the biggest upside lies in the agent orchestration layer — giving ServiceNow an edge with its AI Control Tower. Microsoft benefits from Azure’s flexible “fungible” capacity, plus Agent 365 and Foundry in the application layer, while Oracle is winning on database speed and efficiency for heavy AI data loads, with cloud migration growth still likely underpriced. Hardware may be selling the dream, but software’s sending the invoice.