US software stocks have come under pressure recently after disappointing updates from major enterprise players, rekindling concerns that artificial intelligence could topple many firms’ business models.
SAP plunged more than 16% on Thursday as analysts flagged a weaker-than-expected cloud backlog and 2026 revenue forecast. ServiceNow also fell 11% on concerns related to AI, even though it projected annual subscription revenue above Wall Street estimates.
“Good, but not good enough,” Morgan Stanley analysts said in a note of ServiceNow’s report. “In an environment of heightened investor skepticism on incumbent application vendors, stable growth, in line with expectations, likely falls short of shifting the narrative.”
These stocks have been witnessing double-digit declines in the past year as investors grow wary about the rapid advances in artificial intelligence, challenging the demand for traditional software licenses and workflows.
“The malaise in software sentiment persists, coupled with a seemingly paradoxical and vicious cycle of depressed valuations, with maintained, if not rising, investor expectations,” J.P.Morgan analysts said in a note.
Microsoft further added to the pressure after it reported a slowdown in cloud growth for the fiscal second quarter and issued softer-than-expected guidance on operating margin for the fiscal third quarter.
For this article, we selected AI stocks by going through news articles, stock analysis, and press releases. These stocks are also popular among hedge funds. The hedge fund data is as of Q3 2025.
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10. Elastic N.V. (NYSE:ESTC)
Number of Hedge Fund Holders: 52
Elastic N.V. (NYSE:ESTC) is one of the 10 AI Stocks Gaining Attention on Wall Street. On January 30, Rosenblatt analyst Blair Abernethy lowered the price target on the stock to $110.00 (from $130.00) while maintaining a “Buy” rating. While there are multiple compression and macro pressures for ESTC, the firm sees strength in tool consolidation and AI-led use cases.
Rosenblatt noted that Elastic is expected to report an in-line to marginal beat in Q3/FY 26 results when it reports in late February. It highlighted recent product advancements of the company, such as the general availability release of its Agent Builder, and also the previous realignment of sales on high value customers.
These factors leave the company well-positioned to benefit from tool consolidation trends in log management, legacy SIEM modernization, and development of new AI and agentic applications using the Elastic Search Relevance Engine with vector database capabilities.
The firm noted that it is leaving its estimates unchanged ahead of third quarter, forecasting Elastic Cloud growth of 21% compares to the 22% in second quarter. Nevertheless, it is taking this opportunity to reduce its price target, a reflection of recent comparable multiple compression and ongoing macro concerns which impact enterprise software.
Elastic N.V. (NYSE:ESTC) is a search AI company offering cloud-based solutions.
9. Fortinet, Inc. (NASDAQ:FTNT)
Number of Hedge Fund Holders: 62
Fortinet, Inc. (NASDAQ:FTNT) is one of the 10 AI Stocks Gaining Attention on Wall Street. On February 2, Scotiabank analyst Patrick Colville downgraded the stock from Sector Outperform to Sector Perform with an $85 price target.
The firm sees Fortinet as a strong company, but believes that the optimism for 2026 appears overstated. It acknowledged that Fortinet is a strong and legendary company with a compelling offering in core secure networking.
However, it is still downgrading the name based on its latest quantitative analysis and recent CISO checks with mid/large-sized enterprises.
“We feel less optimistic about the name in 2026.”
Fortinet, Inc. (NASDAQ:FTNT), a cybersecurity company, provides enterprise-level next-generation firewalls and network security solutions, leveraging artificial intelligence across its cybersecurity products.
8. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 66
International Business Machines Corporation (NYSE:IBM) is one of the 10 AI Stocks Gaining Attention on Wall Street. On January 30, Bernstein SocGen Group analyst Mark C. Newman raised the price target on the stock to $330.00 (from $280.00) while maintaining a “Market Perform” rating. The firm has flagged IBM’s full valuation despite its Q4 beat due to tougher comps ahead and an AI-driven sector risk.
Bernstein noted how IBM beat consensus expectations on revenue, earnings per share, and free cash flow in its latest quarterly report. The company anticipates profit margin expansion of about one percentage point and free cash flow of estimated $15.7 billion for FY26.
Its revenue growth and margin improvement expectations align with its full-year guidance for the first quarter of 2026. Further, IBM anticipates the closing of its Confluent acquisition by mid-2026, resulting in an estimated $600 PTI dilution in the second half of 2026. The acquisition is likely to be accretive to adjusted EBITDA in FY27 and to free cash flow in FY28.
Bernstein noted that IBM’s valuation appears full, particularly due to IBM’s heavy exposure to software and consulting, both of which are vulnerable to AI-driven devaluation. Nevertheless, IBM’s stock has remained resilient.
“Our updated SOTP analysis implies that part of the long-term upside from IBM’s nascent Quantum business is already in the stock.”
International Business Machines Corporation (NYSE:IBM) is a multinational technology company and a pioneer in artificial intelligence, offering AI consulting services and a suite of AI software products.
7. Datadog, Inc. (NASDAQ:DDOG)
Number of Hedge Fund Holders: 72
Datadog, Inc. (NASDAQ:DDOG) is one of the 10 AI Stocks Gaining Attention on Wall Street. On February 2, DA Davidson analyst Gil Luria reiterated a Buy rating on the stock with a $225.00 price target. The firm calls DDOG a Top Pick in Software and a clear AI winner with long runway for higher growth.
DA Davidson highlighted that DDOG is a top pick in software, but it doesn’t anticipate it to guide aggressively right now, similar to other software names. In an investor note, it said that it does anticipate another quarter of momentum with AI Natives for DataDog, possibly driving an outsized earnings beat and sustain strong growth through the remainder of the year.
However, the firm believes that management is unlikely to break from its pattern and will try to match the current consensus instead of materially exceeding expectations. Despite the conservative guidance, DA Davidson believes DDOG is a clear AI winner whose AI-native momentum will drive strong growth.
“We continue to view Datadog as a high growth company with a long runway and clear AI winner. Reiterate BUY rating.”
Datadog, Inc. (NASDAQ:DDOG) offers a cloud-based SaaS platform for monitoring and analytics, specializing in cloud computing and AI-powered cybersecurity products.
6. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 81
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the 10 AI Stocks Gaining Attention on Wall Street. On February 2, William Blair analyst Louie DiPalma upgraded the stock to “Outperform,” citing buying opportunity after a 30% selloff.
The firm’s Dotted Line government tracker and its separate commercial tracker has indicated that Palantir’s momentum continues to build. The new administration “continues to build” while enterprises continue to add workflows.
This, the firm continued, has contributed to an “astounding” Rule-of-114 September quarter, and also a likely strong December quarter. It added that while Palantir’s valuation remains “frothy,” it appears more reasonable compared to recent venture rounds for AI ecosystem companies.
Despite Palantir’s momentum, shares have not been immune to the broader software sector selloff. The earnings day reaction is also likely to be volatile, said the firm, but it anticipates a positive move following earnings.
The firm further said that even if the stock does fall like they did last quarter, shares are likely to return to greater than $200 over the next twelve months driven by positive developments. Meanwhile, there have been reduced concerns around government contract concentration under the current administration.
“We upgraded shares to Market Perform last March following the DOGE-inspired selloff at $84 per share as the risk/reward became more attractive under the new administration (upgrading to Market Perform on 33% pullback; Rich AI Pipeline Helps Offset Frothy Valuation). In our view, the recent selloff creates a buying opportunity for Palantir as a leader in the AI supply chain.”
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems.
5. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 104
ServiceNow, Inc. (NYSE:NOW) is one of the 10 AI Stocks Gaining Attention on Wall Street. On January 30, Bernstein SocGen Group analyst Peter Weed reiterated an Outperform rating on the stock with a $219.00 price target. The firm believes the stock is undervalued and that H2 AI token renewals are an upside catalyst.
Bernstein called ServiceNow a “discount large cap growth” opportunity, stating that it appears relatively cheap as compared to other large-cap software peers with market capitalizations above $50 billion when evaluated on a three-year growth versus price-to-free-cash-flow basis.
Analysts noted that the premium historically assigned to high-growth software has eroded further, leaving NOW trading at lower multiples despite rising forecasts for fiscal 2028 growth.
Bernstein projects a 30 basis point currency-constant subscription revenue beat for NOW as artificial intelligence reaches $1.2 billion in annual contract value in FY26, compared to the company’s $1 billion guidance.
“And note: there is potential conservatism in the company and our model — neither include upside from early consumption-driven renewals. Some customers from the FY24 AI cohort ($200MM+ ACV) could require early incremental AI token renewals in the 2nd half of FY26, based on their reported rapid pace of token consumption.”
ServiceNow, Inc. (NYSE:NOW) provides a platform that integrates workflows, data, and AI to coordinate how work flows across large organizations.
4. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
Oracle Corporation (NYSE:ORCL) is one of the 10 AI Stocks Gaining Attention on Wall Street. On February 2, Barclays’ analyst Raimo Lenschow reiterated an Overweight rating on the stock with a $310.00 price target. The firm sees clarity on financing after the proposed $45–50B raise, easing credit pressure and assisting equity upside.
Oracle announced on Sunday that it will expectedly raise between $45 billion and $50 billion in calendar 2026 through a combination of stock sales and debt. This move, the company noted, is a reflection of its commitment to maintain an investment-grade rating amid the AI spending.
According to Barclays, these transactions are likely to ease pressure on Oracle’s credit story, and will also help the company maintain its investment grade rating. It also provides clarity about the financing needs for the year.
Oracle Corporation (NYSE: ORCL) is a database management and cloud services provider.
3. Apple Inc. (NASDAQ:AAPL)
Number of Hedge Fund Holders: 166
Apple Inc. (NASDAQ:AAPL) is one of the 10 AI Stocks Gaining Attention on Wall Street. On January 30, Evercore ISI analysts dropped Apple from their TAP Outperform list following its December-quarter earnings.
Apple reported fiscal Q1 2026 revenue of $143.8 billion and earnings per share of $2.84, ahead of Street expectations of $138.4 billion and $2.67, respectively. Total revenue grew 15.7% year-over-year, led by iPhone sales increasing 23% and Services growing 13.9%.
Meanwhile, gross margins for the quarter were 48.2%, demonstrating a 130 basis point year-over-year improvement and exceeding management’s guidance range. The firm also higglighted how Apple’s supply constraints limited their ability to meet upside in demand, expected to continue into next quarter.
“Looking ahead, AAPL guided Mar-qtr revs up +13-16% y/y (vs. street at up ~10%), reflecting ongoing iPhone demand and continued DD Services growth, despite ongoing product supply constraints. Notably, memory headwinds had a minimal impact on GMs in the quarter, though they are expected to have more of a negative impact in the Mar-qtr.”
Noting key points from the EPS call, it noted that it is removing AAPL from their tactical outperform list following its strong beat-and-raise.
“We continue to view AAPL as one of our top picks for CY26 and maintain our OP rating and $330 target.”
Apple is a technology company known for its consumer electronics, software, and services.
2. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 234
NVIDIA Corporation (NASDAQ:NVDA) is one of the 10 AI Stocks Gaining Attention on Wall Street. On February 2, Bank of America reiterated the stock as “Buy” with a $275 price target. The firm said that investors should buy any weakness in shares.
“Our $275 PO is based on 28x CY27E PE ex cash, within NVDA’s historical 25x-56x forward year PE range, which we believe is justified by NVDA’s leading share in fast-growing AI compute/networking markets, offset by lumpiness in global AI projects, cyclical gaming market, and concerns around access to power.”
In other news, Nvidia CEO Jensen Huang recently announced that Nvidia will participate in OpenAI’s latest funding round, making “the largest investment we’ve ever made.”
“We will invest a great deal of money,” Huang told reporters at the event. “I believe in OpenAI. The work that they do is incredible. They’re one of the most consequential companies of our time.”
Analysts on Wall Street have a consensus “Buy” rating on the stock. The average price target of $250 implies a 33.6% upside; however, the Street-high target of $432 implies an upside of 131.28%.
NVIDIA Corporation (NASDAQ:NVDA) specializes in AI-driven solutions, offering platforms for data centers, self-driving cars, robotics, and cloud services.
1. Amazon.com, Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 332
Amazon.com, Inc. (NASDAQ:AMZN) is one of the 10 AI Stocks Gaining Attention on Wall Street. On January 30, Wedbush analyst Dan Ives reiterated an Outperform rating on the stock with a $340.00 price target. The firm sees robust AWS momentum for AMZN, robust Q4 setup, and a $25.2B OI forecast reinforcing multiple expansion potential.
The rating affirmation comes ahead of the company’s fourth-quarter earnings report scheduled for Thursday, February 5. Webush believes that investor confidence has been building, and Amazon’s previous quarter report has had sentiment turn more positive.
“AWS growth was well ahead of expectations, and we are encouraged by the implied level of AWS demand given the pace of backlog growth and additional supply coming online over the next twelve months.”
The firm further said that it believes 2026 is going to be a big year for AWS, potentially serving as a catalyst for shares. With shares trading for ~22x our 2027 GAAP EPS estimate, it believes the risk-reward is attractive ahead of fourth quarter.
“We believe another robust quarter of AWS growth and continued proof points from partners could be the key to drive multiple expansion in the coming quarters.”
Overall, Wedbush is constructive on the setup leading into the report due to positive commentary around AWS growth, healthy trends for the core retail business, and robust advertiser demand.
It has raised its estimates for Amazon, projecting fourth-quarter operating income of $25.2 billion (11.8% margin), an estimated 1% above consensus. Meanwhile, it expects operating income of $103.0 billion (12.8% margin) for the full year.
“Amazon remains our top eCommerce pick for 2026, and we reiterate our Outperform rating and $340 PT.”
Amazon.com Inc. (AMZN) is an American technology company offering e-commerce, cloud computing, and other services, including digital streaming and artificial intelligence solutions.
While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than AMZN and that has 100x upside potential, check out our report about this cheapest AI stock.
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