Core Viewpoint - The current bear market for software stocks presents a significant opportunity for long-term investors seeking value, despite major stock indexes reaching new highs [1][4]. Group 1: Market Overview - The Dow Jones Industrial Average recently surpassed 50,000, the S&P 500 has gained at least 16% in six of the last seven years, and the Nasdaq Composite has outperformed both [1]. - The iShares Expanded Tech-Software Sector ETF is nearly 28% below its all-time high, indicating a challenging environment for software investors [2]. Group 2: Salesforce - Salesforce is identified as a bargain amid the software sell-off, with a market cap of $174 billion and a current price of $185.36 [6][7]. - The company has embraced AI as a growth driver, with its Agentforce AI platform generating over $500 million in annual recurring revenue (ARR), up 330% year-over-year [8]. - Salesforce's remaining performance obligation (RPO) surged 11% to $29.4 billion, and it maintains a forward price-to-earnings (P/E) ratio of 14.8, a 52% discount to its five-year average [9][10]. Group 3: Adobe - Adobe is also considered a historically cheap stock, with a closing price of $266.90, the lowest since October 2019 [12]. - Despite concerns about generative AI impacting its software solutions, Adobe's Digital Media segment ended with $19.2 billion in ARR, up 11.5% year-over-year [15]. - The company's forward P/E of 10.1 is 61% below its average since 2020, indicating a favorable valuation [18]. Group 4: Okta - Okta, a cloud-based cybersecurity company, is viewed as a strong investment opportunity, with a current price of $84.99 and a market cap of $15 billion [20]. - The company reported a 17% year-over-year increase in RPO to nearly $4.3 billion and a 37% increase in net cash from operating activities [23]. - Okta's forward P/E of 24 reflects a significant drop from previous years, making it an attractive option for investors [24].

Core Insights - The evolution of artificial intelligence (AI) is seen as the next significant technological leap, similar to the internet's impact on corporate growth [2][4] - AI is projected to add $15.7 trillion to the global economy by 2030, creating numerous investment opportunities [4] Group 1: Investment Opportunities - Alphabet (Google's parent company) is identified as a strong buy due to its historically low valuation and dominant market share in internet search, holding 89.6% as of May 2025 [5][6] - Alphabet's revenue is heavily reliant on advertising, which constitutes approximately 74% of its net sales, positioning it well for economic growth [7][8] - Google Cloud is highlighted as a key growth driver, with an annual run-rate revenue exceeding $49 billion, benefiting from generative AI solutions [9] - Alphabet's shares are trading at a forward price-to-earnings (P/E) ratio of 17.5, representing a 28% discount to its five-year average [10] - Okta, a cybersecurity company, is also recommended as a buy, with a forward P/E ratio of 27 and a subscription-based model that offers high margins [12][16] - The demand for cybersecurity solutions is expected to grow, driven by the increasing necessity for businesses to protect sensitive data [13] Group 2: Investment Risks - Palantir Technologies is flagged as a stock to avoid due to its excessively high price-to-sales (P/S) ratio, which recently surpassed 110, indicating overvaluation [17][19] - Despite having a sustainable business model with predictable cash flow, Palantir's valuation is considered unsustainable compared to historical norms for innovative companies [18][19] - The narrow customer base for Palantir's most profitable segment, Gotham, limits its long-term growth potential, as it primarily serves the U.S. and its allies [22]