Software Stocks Post Best Month Since 2001 as Snowflake and Okta Defy AI Disruption Fears

Software stocks closed May with their strongest monthly performance in nearly 25 years, driven by blowout earnings from Snowflake and Okta that eased—at least temporarily—widespread fears that artificial intelligence would render traditional software companies obsolete.

The iShares Expanded Tech-Software ETF rose 8% for the week and finished May up 21%, its best monthly showing since October 2001. That earlier rally came during a brief reprieve in the dot-com collapse; this one arrives amid a reckoning over whether AI is a threat or a tailwind for established software businesses.

Despite the month's gains, the ETF remains down 3.8% for the year, still badly trailing the Nasdaq, which has gained 18% in 2026.

Snowflake was the week's standout performer, logging its best single trading day ever on Thursday and gaining nearly 50% across the four trading sessions following the Memorial Day holiday. The data platform company announced a $6 billion cloud and chip agreement with Amazon, raised its forward guidance, and pointed to accelerating customer adoption of AI workloads.

"We're also seeing customers deploy and scale workloads at a faster pace," Snowflake CEO Sridhar Ramaswamy told analysts on the company's earnings call.

Analysts at Argus Research characterized Snowflake as a "picks and shovels" play on generative AI and raised their price target to $300 from $250. The stock closed Friday at $255.55, bringing its year-to-date gain to 17%. "We think Snowflake may actually be a beneficiary of GenAI development as enterprises increasingly need to unify and harmonize data, Snowflake's core business, in order to exploit the benefits of GenAI," the analysts wrote in a post-earnings report.

Okta delivered an equally striking session, climbing a record 30% on Friday after reporting better-than-expected results. The identity security company attributed part of its momentum to enterprises racing to secure their systems against a surge in AI-driven threats, including what it described as waves of bot armies.

"AI products are going to take longer, but every organization is going to build and deploy agents," Okta CEO Todd McKinnon told CNBC. "It's fundamental infrastructure that's going to be required over the next few years."

The results from both companies reframe a debate that has shadowed the sector for months. The rise of so-called vibe coding—platforms from Anthropic, OpenAI, and others that allow users to build applications in minutes—had fueled predictions of a "SaaSpocalypse," a term that gained traction on Wall Street as software stocks fell sharply over the past year.

The week's gains were not limited to Snowflake and Okta. Atlassian climbed 26% for the week and ServiceNow surged more than 20%, while Shopify, Workday, and Asana each gained at least 14%. Among cloud infrastructure players that also sell software, Oracle jumped 16% and Microsoft rose nearly 8%—though Microsoft remains down almost 7% for the year, the worst performance among technology's megacaps.

Adding further momentum to the broader tech sector, Dell Technologies reported a blockbuster quarter that renewed enthusiasm around data center infrastructure investment. The Department of Defense also announced a five-year, $9.7 billion contract with Dell covering Microsoft software and cloud services—a deal that has separately drawn scrutiny over potential conflicts of interest after President Trump publicly promoted Dell's products and held significant stock in the company.

The software sector's revival now sets the stage for a crowded earnings calendar in the week ahead, with Palo Alto Networks, Broadcom, and CrowdStrike all scheduled to report results. Investors will be watching closely to determine whether the May rebound reflects a durable shift in sentiment or a short-lived reprieve in a sector still navigating the long-term implications of AI displacement.

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