What Happened?
A number of stocks jumped in the afternoon session after investor confidence rebounded as markets softened their view on the existential threat AI poses to traditional software companies.
After a period of significant underperformance, dubbed the "SaaS Rout of 2026," where software stocks traded at a discount to the S&P 500, the prevailing fear that AI would completely disrupt and replace traditional Software-as-a-Service (SaaS) companies began to subside.
Experts noted that these companies possess significant advantages, including established enterprise relationships, vast amounts of proprietary data, and deep integration into customer workflows, which AI is unlikely to erase overnight. This changing perspective suggests a potential re-rating for the sector as investors realize these companies may be well-positioned to integrate and leverage AI rather than be replaced by it.
The stock market overreacts to news, and big price drops can present good opportunities to buy high-quality stocks.
Among others, the following stocks were impacted:
- Vertical Software company Manhattan Associates (NASDAQ: MANH) jumped 3.6%. Is now the time to buy Manhattan Associates? Access our full analysis report here, it’s free.
- Identity Management company Okta (NASDAQ: OKTA) jumped 3.5%. Is now the time to buy Okta? Access our full analysis report here, it’s free.
- E-commerce Software company Commerce (NASDAQ: CMRC) jumped 3.8%. Is now the time to buy Commerce? Access our full analysis report here, it’s free.
- Endpoint Security company SentinelOne (NYSE: S) jumped 3.5%. Is now the time to buy SentinelOne? Access our full analysis report here, it’s free.
Zooming In On Commerce (CMRC)
Commerce’s shares are very volatile and have had 29 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 3.4% after the April PPI report sent Treasury yields to 10-month highs, with the 10-year yield rising to 4.49%.
This 'sticky and accelerating' inflation data effectively eliminated 2026 rate-cut hopes, raising the discount rate applied to long-duration growth earnings. BNN Bloomberg noted technology-related inflation was emerging as a structural concern, with computer software prices up year-over-year, potentially triggering a pullback in enterprise software spending.
Software companies sell long-duration subscription revenue, recurring contracts whose value is heavily weighted toward future earnings. When Treasury yields rise, the discount rate investors apply to those future cash flows rises with them, which mechanically reduces the present value of the business and compresses the price-to-earnings multiple.
Beyond the rate channel, the PPI print confirmed that software-specific inflation was running well above the headline rate. This 'sticky' pricing power for vendors is a double-edged sword: while it supports current revenue, it risks forcing enterprise customers to consolidate seats or delay new deployments to protect their own margins in a negative real-wage environment.
Commerce is down 31.2% since the beginning of the year, and at $2.80 per share, it is trading 49.3% below its 52-week high of $5.51 from November 2025. Investors who bought $1,000 worth of Commerce’s shares 5 years ago would now be looking at only $56.72.
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