Mark Chaken argues that the software selloff has real downside risk because AI tools lower barriers to building software, while several semiconductor/data-center-adjacent names still show momentum. He rejects buying beaten-down software names now, prefers relative strength plus bullish power-gauge setup, and says the broader market remains healthy despite rotation out of mega-cap tech.
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Mark Chaken’s core thesis is a split-screen market: software is under pressure and still likely fragile, while selected semiconductor and data-center infrastructure names are where the real momentum sits. He starts from the idea that AI tools like Claude and ChatGPT are making it easier for customers to build their own software workflows, which threatens embedded SaaS businesses and their premium valuations. He explicitly says the damage in software is not yet something he wants to buy into and uses Microsoft’s gap fill as evidence that the selloff has already gone far enough to make near-term dip buying unattractive. His software argument is nuanced rather than blanket-bearish. …
Near term, the actionable setup is to stay wary of software weakness and look for pullbacks rather than chasing the semis that already broke out. The immediate risk is a reversal in the momentum trade or a deeper leg down in software before support forms.
Over the next few weeks and months, the base case is continued rotation within tech toward semis, testing/quality, and energy-linked infrastructure names if AI spending stays firm. The view would weaken if relative strength fades, breadth deteriorates, or the recent earnings-driven bids fail to hold.
Structurally, he is arguing that AI is eroding the old software moat and shifting leadership toward infrastructure and picks-and-shovels exposures. If that regime persists, investors may need to value software more skeptically and focus on enabling layers around compute, data centers, and energy.
Software stocks are in a genuine downturn with real legs driven by the threat that generative AI tools like Claude and ChatGPT can replace many SaaS products.
It is too early to buy the dip in software stocks — trying to catch them now is like catching a javelin.
Onto Innovation (NTO) is the best tech stock to buy right now because it provides chip-testing equipment critical to data center buildout and has a very strong uptrend.
Do you think this software downturn has real legs to it?
He says yes, arguing that the psychological impact of favorite software names breaking down while the S&P 500 and Dow make new highs is significant. He also says new AI tools like Claude and ChatGPT create a real threat to embedded software business models because customers can now build similar products themselves.
How do you respond to the argument that large software companies still have profits, demand, and sticky enterprise adoption?
He says the argument is valid, but with a caveat: companies with large installed bases can survive, while more vulnerable platforms and niche software names face real challenges. He gives Salesforce as an example of a deeply embedded business, but says names like Roblox and Doximity are more exposed to AI-based competition and lower barriers to entry.
Would you buy the dip in software stocks right now?
No. He says it is too early to step in because the damage is too large and these names are like trying to catch a javelin; he thinks buyers are likely to get hurt. He adds that Microsoft has already filled a major gap, which shows how serious the technical damage is.
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