Quietly filed on July 1st… (From Behind the Markets)

Software spending continues to grow, with extra tailwinds in many cases thanks to AI, and a recent spate of earnings wins affirms this. Of course, as the landscape shifts with the influx of AI and the threat of a "SaaSpocalypse" that could eliminate or reduce the value proposition of many software-as-a-service (SaaS) firms, investors must be more cautious: strong revenue growth, expanding margins and free cash flow, customer and net revenue retention, and other factors all matter more than ever.

At the Dreamforce 2026 conference, customer relationship management giant Salesforce Inc. (NYSE: CRM) announced an expanded partnership with OpenAI that will integrate the latter's frontier AI models into its platform. With the potential for a symbiotic relationship emerging, investors may have renewed interest in the SaaS space more broadly. Fortunately, two exchange-traded funds (ETFs) with significant exposure to this area are already rallying and may have more room to run as new catalysts solidify.

How AI Could Drive Further SaaS Growth (and What to Watch Out For)

The Salesforce partnership with OpenAI allows the CRM company to act as an orchestration layer rather than as a competitor to a technology that many have worried might replace SaaS entirely. For OpenAI, the benefits include the potential for increased access to a new customer base. Salesforce's customer relationships and enterprise data are significant advantages and could lead to material revenue impacts. Given the company's record Q2 revenue of $11.4 billion and AI-related annual recurring revenue of $1.5 billion, it's not hard to imagine an expanded partnership continuing to grow those areas.

At the same time, if AI should end up compressing margins by becoming a "must-have" for all SaaS companies, even if it does not have a major benefit, say, or if usage and customer bases can't maintain the appropriate growth levels, there may be trouble still for SaaS firms down the line.

IGV's U.S. Software Focus Illustrates Risks and Rewards of the Industry

For the broadest bets on SaaS going forward—without the need to wager on individual company successes—a fund like the iShares Expanded Tech-Software Sector ETF (BATS: IGV) may appeal. The fund has a special focus on some 107 U.S. software firms, including both those that are already heavily involved in AI and those that have not (or not yet) made this pivot publicly.

IGV's momentum in the last six months is impressive: the fund has climbed by 26% in that time, though it remains up only about 2.75% year to date (YTD) owing to declines earlier in the year. With more than $14 billion in assets under management and robust trading volumes, investors shouldn't have to worry about liquidity, regardless of how actively they may trade IGV shares.

This fund's performance so far in 2026 reveals both the uncertainty of investors concerning the future of SaaS and, potentially, the recent momentum that has been building in this industry. With the Salesforce-OpenAI partnership as a visible endorsement of the potential synergies between SaaS and AI, this momentum could continue for the foreseeable future.

WCLD: A Higher-Beta Cloud Software Alternative

The WisdomTree Cloud Computing Fund (NASDAQ: WCLD) has a different focus from IGV—it targets cloud computing companies more broadly, rather than U.S. software makers specifically—but there is nonetheless a fair amount of potential overlap here. For just a slightly higher fee (0.45% for WCLD as compared to 0.38% for IGV, on an annual basis), WCLD has returned a much more impressive 44% in the last six months and 19% YTD.

WCLD targets U.S.-listed firms, including ADRs, so it has a fairly wide geographic reach. It is also equally weighted, so all of its 66 positions account for roughly the same portion of the portfolio. This can insulate the fund in case of standout negative performances, although it may also reduce the positive impact of strong ones.

One trade-off for a stronger returns profile this year is WCLD's significantly smaller asset base (the fund has under $300 million in managed assets) and much lower trading volumes relative to IGV. Its portfolio is substantially narrower as well. This further affects the risk/reward profile for this fund. WCLD doesn't rely so much on mega-cap tech firms to drive its returns, opting instead for a basket that also includes more emerging cloud software companies. These firms may actually see an outsized benefit if enterprise AI spending does, in fact, broaden significantly across the industry.

For investors, the choice between these funds may come down to risk tolerance as well as overall conviction. IGV provides exposure to more established software firms overall, with the benefit of durable customer bases, while WCLD may be a higher-beta alternative.

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