Tech power player Rick Sherlund: 'Software isn't only eating the planet , it's leading the market higher'

He hit No. 1 on Institutional Investor's all-star analyst list for software 17 times during a row.

Now as an underwriter , Rick Sherlund may be a tech power player who believes the group's record run is within the early innings.

During Tuesday's exclusive interview on CNBC"s "Trading Nation," he delivered a bullish case for tech, emphasizing demand for cutting-edge software because the U.S. battles the fallout from the coronavirus pandemic.

"Software isn't only eating the planet , it's leading the market higher," said the Bank of America Merrill Lynch president of technology investment banking. "Covid has accelerated the momentum and therefore the urgency behind digital transformation."

Big Tech has been crushing records on Wall Street. On Tuesday, the tech-heavy Nasdaq closed at its 30th all-time high thus far this year. It's now up almost 22% in 2020, while the broader S&P 500 has risen 2%.

Plus, the Nasdaq has soared 65% since the March 23 low.

"The sector offers phenomenal growth, and immediately , the road is valuing that growth because you cannot find growth elsewhere," Sherlund said.

He suggests the record run is justified supported long-term potential.

"Software wont to be the tail of the dog, and now it's become the top of the dog," he said. "People use this to not only work on home, but patronize home, to find out reception , to play, to entertain reception [and] to socialize. So, software is basically becoming the business."

He also downplays comparisons with the 2000 tech bubble.

"We are nowhere near those sorts of levels, and that we have good business models now," said Sherlund. "I took a glance recently at variety of dot-com names — where they were valued some time past and where they're today. We are nowhere near those sorts of valuation levels."

However, Sherlund acknowledges the rally could see some temporary burnout thanks to the character of the economic recovery.

"It's likely to be led by the cyclical sectors that have lagged behind, and that is getting to require a vaccine," he added. "But the expansion rates that we see within the sector are just getting started."

According to Sherlund, the softness should be temporary, and tech IPOs will heat up in 2021.

"We are seeing a replacement generation of technology emerging over the horizon, a replacement generation of visionary leaders. It's well funded and guided by experienced VC board members." said Sherlund. "There's an awful lot to be wiped out the space."

He expects innovation to overshadow risks including the presidential election and U.S.-China trade tensions.

"Companies are likely to travel call at an earlier stage," Sherlund said. "I have companies now that do about $100 million [in revenues] saying 'can we hit the window next year?'"