After tech investors licked their wounds yesterday on the launch of the Chinese artificial intelligence (AI) chatbot DeepSeek, today they saw an opportunity from the upheaval.
Software stocks broadly rallied as the stock market bet that costs to run AI infrastructure could come down and efficiencies could improve, benefiting the software companies that rely on that infrastructure and are launching their own AI platforms and looking to leverage the power of agentic AI.
That makes sense, as the AI infrastructure is being built to ultimately run software applications. Among the winners today were MongoDB (MDB -2.00%), Salesforce (CRM -1.65%), and GitLab (GTLB -3.33%). As of 11 a.m. ET, the stocks were up 8%, 5.4%, and 10.3%, respectively, on the news.
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Software stocks are soaring
All three stocks have staked their future on AI in different ways.
MongoDB is a provider of NoSQL database software, and AI has huge potential applications in the database sector. MongoDB has launched an AI Applications Program (MAAP), and is working with companies like Meta Platforms.
It also said that using AI tools along with professional services can reduce the cost of migrating legacy applications onto MongoDB by more than 50%.
However, management also told investors that AI wouldn't be a meaningful tailwind for fiscal 2025, which ends this month, though it sees it as a valuable opportunity and a question of when, not if. The technology behind DeepSeek could help accelerate AI demand for companies like MongoDB by making it more efficient and accelerating its deployment.
Salesforce is already pushing hard into AI with Agentforce, its agentic AI tool that it launched in September. Agentforce hasn't made a notable impact on Salesforce's business yet, though it's still very early, and the company has not yet reported fourth-quarter results.
However, Salesforce is the kind of company that looks well positioned to capture demand for AI software, as it's well entrenched as the leader in customer relationship management (CRM), with more than 150,000 customers, including Fortune 500 companies and small and medium-sized businesses.
Like MongoDB, Salesforce helps organizations manage data, in this case related to sales and customer service, as well as AI tools that make that easier and cheaper for customers.
Finally, GitLab is a specialist in cloud-based DevSecOps, or helping developers and organizations securely manage their IT infrastructure and deploy new applications and programs. It automates DevSecOps, and its software replaces a number of point solutions that businesses had traditionally used to meet those needs.
AI can play a role in GitLab in a number of ways. It launched GitLab Duo, a suite of AI features that assist developers, while they work in GitLab, and DeepSeek could also drive increased interest in building on platforms like GitLab, making it cheaper to build AI features into programs. That could attract more interest in using GitLab as it increases its potential utility.
What's next for the software sector?
Investors have jumped to a number of conclusions over the last two trading sessions in response to DeepSeek, but at this point, a lot is still unclear about how AI might change.
In a geopolitical environment where TikTok has essentially been banned because of a national security risk, it's hard to imagine a Chinese AI chatbot not facing a similar restriction. Still, the technology is out there, which means American companies are likely to copy it or improve upon it. Already, Meta is reportedly working on a war room to reverse-engineer DeepSeek's technology so it can beat it and capture the related cost savings.
Technology costs tend to go down over time, even when there isn't a major leap like DeepSeek, so software companies like these three should benefit from falling AI costs and improved efficiencies over time, no matter what happens with DeepSeek.
Taking the long view, MongoDB, Salesforce, and GitLab are all industry leaders and should benefit from AI over the long run. That's one reason to be bullish on these stocks as the AI future continues to unfold.
