The reasons behind the upward trajectory of software company shares, specifically MongoDB, Salesforce, and GitLab, are noteworthy.
After yesterday's tech investor bruising following the debut of the Chinese AI chatbot DeepSeek, today they spotted an opportunity in the mayhem.
Software stocks soared as the market bet that costs connected to running AI infrastructure might decrease, and efficiencies could increase, favoring software companies relying on this infrastructure and launching their AI platforms. These companies are aiming to capitalize on the power of agentic AI.
In the wake of these developments, stocks like MongoDB (MDB 2.24%), Salesforce (CRM 0.21%), and GitLab (GTLB 2.73%) skyrocketed. As of 11 a.m. ET, these stocks climbed 8%, 5.4%, and 10.3%, respectively, spurred by the news.
Venturing into AI-Land
Each of these software powerhouses has different methods for embracing AI.
MongoDB, a NoSQL database software provider, sees significant potential in AI within the database sector. The company has initiated the AI Applications Program (MAAP) and is collaborating with heavyweights like Meta Platforms for this purpose. Moreover, using AI tools alongside professional services could cut migration costs for legacy applications onto MongoDB by over 50%. However, management acknowledged that AI isn't likely to be a substantial tailwind for fiscal 2025. They perceive it as an essential opportunity—a question of "when," not "if." The DeepSeek technology could expedite AI demand for companies like MongoDB by enhancing its efficiency and computational speed.
Salesforce is already entrenched in AI, having launched Agentforce, its agentic AI tool, in September. Agentforce hasn't significantly impacted Salesforce's business to date, but given the early stage, it's hardly surprising. Salesforce is particularly well-positioned to capture AI software demand, as the leader in customer relationship management (CRM), with nearly 150,000 customers, from Fortune 500 companies to small and medium-sized enterprises. By aiding organizations in managing data and providing less expensive AI tools, Salesforce stands to benefit from the AI revolution.
Finally, GitLab is a specialist in cloud-based DevSecOps, including helping developers and organizations effectively manage IT infrastructure and deploy new applications and programs. AI plays a role in GitLab in a variety of ways. They've introduced GitLab Duo, an AI suite, and by utilizing DeepSeek, they might witness an increase in interest in building on platforms like GitLab, making it more affordable to incorporate AI features into software. This could bring more interest in using GitLab, expanding its potential utility.
What's in Store for the Software Sector?
The market has leaped to several conclusions since DeepSeek's unveiling, but many aspects of AI's potential impact remain unclear at this point. In a geopolitical context where TikTok faces potential national security restrictions, it seems unlikely a Chinese AI chatbot would escape a similar fate. That said, the technology is available, encouraging American companies to replicate or build upon it. Meta is reportedly constructing a war room to reverse-engineer DeepSeek's technology.
Whatever the outcome of DeepSeek, technology costs typically decrease over time. This means software companies, including these three, stand to benefit from shrinking AI costs and increased efficiencies in the long term.
Taking a long-term view, MongoDB, Salesforce, and GitLab are all industry leaders, poised to capitalize on AI's progress. That makes a strong argument to stay optimistic about these stocks as the AI future unfolds.
In light of the market's response, investors are now considering allocating funds to companies that can leverage AI effectively. This trend is evident as prominent investors are looking at software companies like MongoDB, Salesforce, and GitLab, which are actively investing in AI technology.
Given the market's focus on AI and its potential to decrease costs and increase efficiencies, these software companies are exploring various strategies to maximize their financial returns. They are not just investing in AI, but also seeking collaboration with other tech giants to stay at the forefront of this rapidly evolving field.
