Tracking the Dip on MSFT? Watch Teradata (TDC) Too
Software has sold off hard lately, with the iShares Expanded Tech-Software Sector ETF (BATS: IGV) down over 30% from its highs:
The fear driving it is real: AI is going to hollow out a lot of SaaS businesses. Point-solution tools that do one thing AI can now replicate for free … those are in trouble.
A note from our sponsors...
Buffett's $114 Secret In 1943, a teenage Warren Buffett put $114 into a special type of account called "The 29% Account." Today, that single, $114 investment would be worth over $15 million. Your bank never told you about this. Click Here to See How It WorksBut like most market fears, this one is being applied with a sledgehammer when it needs a scalpel. Not every software company faces the same threat. Some are actually positioned to benefit.
The trick is knowing which is which, and that’s exactly where our Zen Ratings system can help.
Why MSFT Is a C Right Now
When software sells off, the instinct is to buy the biggest, safest name on the dip. Microsoft (NASDAQ: MSFT) looks like that name.
But the investment case has structurally changed.
The Mag 7 were once prized as asset-light compounders: businesses that could grow earnings without plowing capital back into the ground. That era is over. Microsoft committed $80 billion to AI data center construction in fiscal 2025 alone. After capex rose 45% to $64.55 billion last fiscal year, the company has guided for further acceleration in 2026 … implying a minimum of around $94 billion.
That's not an asset-light business anymore. Heavy capex compresses free cash flow, raises the bar for returns, and changes what you're actually paying for.
That’s partly why MSFT scores a C on our Value Component Grade. The business isn't broken. But even though it’s sold off, the price relative to what you're getting isn't as compelling as it might seem.
The Software Companies Actually Built for This Moment
Here's what the broad SaaS selloff is missing:
AI doesn't threaten every kind of software. It threatens the tools it can replace. It increases demand for the infrastructure it runs on.
Every enterprise deploying agentic AI internally needs a platform that can handle the query load at scale, reliably, with predictable costs. Agentic AI can increase workloads on data platforms by up to 25 times, and requires 50 to 100 times more compute resources than previous analytic workloads, according to Nasdaq.
That's a volume driver for certain businesses … and why I’m keeping an eye on one name in particular.
The Top-Rated Software Play Right Now: TDC
Teradata (NYSE: TDC) is our only A-rated software name, and it scores an A on Value at the same time MSFT scores a C.
See how TDC scores on all Component Grades.
Teradata doesn't build AI models. It manages the enterprise data platforms that AI queries. Its massively parallel architecture and patented workload management were designed for exactly the kind of high-volume, complex query environment agentic AI creates. The more enterprises deploy AI internally, the more load lands on platforms like Teradata's.
The transition is already showing up in the numbers. Cloud ARR grew 15% and Q4 revenue beat expectations … evidence the shift away from legacy on-prem contracts is happening faster than skeptics expected. The company also completed more than 150 AI engagements with customers in 2025, helping clients deploy AI on enterprise data at scale.
And the stock hasn't caught up to any of it. TDC trades around $26 against an average analyst price target of $33.60 … implying roughly 30% upside:
See all analyst predictions for TDC here.
The Bottom Line
The SaaSpocalypse is real … for the software AI can replace. For the infrastructure AI depends on, it's the opposite story.
MSFT gets the attention when software dips. But buying a heavy-capex business at a premium multiple isn't the safe play it looks like. Our ratings say so directly: C on Value, C overall.
TDC is the name most investors aren't watching. A-rated, deeply discounted, and sitting directly in the path of the agentic AI build-out.
See all top-rated software stocks
What to Do Next?
Want to get in touch? Email us at news@wallstreetzen.com.
Keep Reading
See All News
Company
AboutNewsBlogStock Investing FAQPlansPrivacy PolicyTerms of ServiceCancellation & RefundsPerformanceHelp GuidesContactTwitterYouTubeNewsletterInformation is provided 'as-is' and solely for informational purposes and is not advice. WallStreetZen does not bear any responsibility for any losses or damage that may occur as a result of reliance on this data.