Software: The Surprise Safe Haven in Tariff Wars?

Ladies and gentlemen, buckle up! We're diving headfirst into the world of software stocks, and let me tell you, the waters are choppy, but there's a lifeboat waiting for you. The latest wave of U.S. tariffs has sent shockwaves through the market, but here's the kicker: software stocks might just be the surprise safe haven you've been looking for!

First things first, let's talk about the elephant in the room: tariffs. The market's in a frenzy, and software stocks are taking a hit. But here's the thing: software isn't like your average physical good. It's delivered through the cloud, making it nearly impossible for tariffs to stick. Bernstein analysts are calling it: "The reaction is overstated!" So, don't panic just yet.

Now, let's talk about the real impact. It's not the tariffs themselves; it's the macroeconomic headwinds. Smaller businesses, venture-backed firms, and vulnerable verticals are feeling the pinch. But here's where it gets interesting: this could actually be a tailwind for GenAI adoption. Companies are accelerating their digital transformation to manage uncertainty, and that means more demand for software solutions.

Let's break it down:

- Cloud Services: Sure, they have physical infrastructure, but the margin pressure from data center components is limited. Hyperscalers and SaaS vendors already offer localized hosting options, so they're not as exposed as you might think.
- Labor and Energy Costs: These are not as exposed to tariffs, so software companies can keep their costs in check.
- Retaliation: Foreign governments might try to retaliate, but most countries don't have a native software industry to speak of. Historic attempts to force domestic adoption have backfired, so don't worry about that.

Now, let's talk about the big players. ServiceNow, Adobe, and Salesforce are all feeling the heat, but here's the thing: ServiceNow could be the next Microsoft. If you can deal with short-term volatility, now might be the time to buy. Adobe's got potential too, but it's going to take some time for the sentiment to turn positive. And Salesforce? Well, the Bernstein team isn't so bullish on that one.

But here's the real kicker: smaller software stocks have been on a tear this year. They're beating chip stocks, and there's more room for gains across the whole sector. So, if you're looking for a safe haven in this tariff war, look no further than software stocks.



So, what's the bottom line? Software stocks might just be the surprise safe haven you've been looking for. Don't miss out on this opportunity! Stay tuned for more updates, and remember: the market hates uncertainty, but software stocks are here to stay. BOO-YAH!