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“Software is eating the world.”

Though Internet entrepreneur Marc Andreessen famously wrote those words eight years ago, the phrase is still—and maybe more—relevant today than ever. What product doesn’t have some software either embedded in it or connected to it, whether cars, clothes, appliances, homes, you name it. And more importantly for investors, the computing and artificial intelligence (AI) explosion is probably nowhere near done. Not even close.

Software, and cloud computing applications in particular, are proliferating like a weed. And not just for consumer facing applications, but practically in every business. Your local auto mechanic as well as the global giant bank JPMorgan rely heavily on software solutions, to make their processes more efficient and improve customer relations, among other things. I’d say that AI remains in the nascent phase of its life.

What about the software/cloud stocks? Many investors balk at the prices and valuations of software and cloud computing stocks, though the stocks are down. And really, from a traditional valuation metric, you can’t blame them.

Typically, they trade at nose-bleed price/earnings ratios, and pretty much any other metric you might choose. Take a look at the price/earnings (P/E) ratios in the ...

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