In this article, we will take a look at the 10 Best AI Software Stocks to Buy Now.
Artificial Intelligence continues to remain in the limelight for 2025, with AI software companies at the center of it. Analysts believe that AI will slowly impact software, and the companies that invest in infrastructure will survive. However, according to Jefferies analyst Brent Thill, some software companies are vulnerable to the AI megatrend, but others will evolve and thrive. “We believe AI is a transformational wave, not a destructive hurricane,” added Thill.
Thill believes that software AI fears are overblown and the pace of AI disruption will be evolutionary, not existential.
“The growing fear that AI will fundamentally change how enterprise software is traditionally built and used has weighed heavily on investor sentiment. Infrastructure and security names have remained resilient amid broader software sector weakness, supported by increasing AI-driven demand and cloud workloads,” added Thill.
AI is continuing to transform from generative AI to agentic AI. According to Tirias Research from Forbes, AI agents will start autonomously chaining AI models together, forming thoughts, executing tasks, and collaborating with other services. “Human prompting will no longer be the sole driver of AI activity once autonomous agents begin to generate usage on their own,” Tirias Research mentioned. The annual rate of token generation is estimated to increase from 677 trillion in 2024 to 2.09 quadrillion by the end of 2025 and reach 77 quadrillion by the end of 2030.
With these industry trends in mind, let’s turn to the 10 Best AI Stocks to Buy Now.
A scientist at a computer station, surrounded by a neural network of artificial intelligence code.
Our Methodology
To compile the list of 10 best AI software stocks to buy now, we shortlisted the largest software stocks involved in offering AI software services. We then ranked these best AI software stocks in ascending order of upside potential. We took the data for the upside potential from CNN. We also mentioned the number of hedge funds holding stakes in these stocks, and the data for hedge funds is taken from Insider Monkey’s Hedge Fund database, updated as of Q1 2025.
Note: The data was recorded on August 15.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
10 Best AI Software Stocks to Buy Now
10. Palo Alto Networks, Inc. (NASDAQ:PANW)
Analyst Upside: 24.23%
Number of Hedge Fund Holders: 77
Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the best AI software stocks to buy now. On August 15, Wells Fargo reiterated a Buy rating on Palo Alto Networks, Inc. (NASDAQ:PANW), keeping the price target at $235.
Andrew Nowinski from Wells Fargo maintained his rating on PANW ahead of its Q4 FY2025. The company posted strong revenue of $2.54 billion, up 16% year-over-year and exceeding estimates of $2.50 billion. The company’s projection was to post revenue between $2.22 billion and $2.25 billion, which it surpassed by quite a margin. The next-generation security ARR soared over 32% from a year ago to $5.6 billion.
“We exited fiscal year 2025 with an acceleration in RPO, and surpassed the $10 billion revenue run-rate milestone, positioning ourselves well for sustained growth ahead,” said Nikesh Arora, chairman and CEO of Palo Alto Networks.
In the last two years, Palo Alto Networks has not missed earnings consensus while missing revenue estimates once. The majority of analysts covering PANW have reiterated their estimates over the last 30 days, suggesting the company will stay on course heading into FY2026. Nowinski also retains his rating on the cybersecurity firm, showing optimism on the company’s outlook. For FY2026, the company anticipates the total revenue between $10.47 billion to $10.52 billion, indicating year-over-year growth of 14%. Whereas, the next-generation security ARR is expected to be in the range of $7 billion to $7.10 billion, reflecting growth rate of 26-27% from a year ago.
Palo Alto Networks, Inc. (NASDAQ:PANW) offers comprehensive AI-powered security solutions across network, cloud, and security operations.
9. International Business Machines Corporation (NYSE:IBM)
Analyst Upside: 25.15%
Number of Hedge Fund Holders: 57
International Business Machines Corporation (NYSE:IBM) is one of the best AI software stocks to buy now. On July 14, International Business Machines Corporation (NYSE:IBM) reported that it had designed and implemented a digital evolution project for Nedgia.
Nedgia is a gas distributor of the Naturgy Group. IBM designed the digital evolution project that uses generative AI agents. The project creates an innovative contact center supported by virtual agents and is a cutting-edge application of generative AI. This solution strengthens customer service by integrating digital agents into the company’s standard telephone and digital customer service channels.
IBM’s digital solution allows Nedgia to replicate and scale automation use cases to resolve most interactions. The automation process includes services such as appointment management for periodic inspections and access to meter reading information. In the future, the solution will also offer the ability to modify supply data points. All these solutions will allow customers to manage their appointments automatically.
While IBM continues to serve in AI technology, Hans Engel from Erste Group sees IBM’s trouble with its revenue growth as a contest of broader sector technology performance. On August 14, Engel downgraded IBM from Buy to Hold. Engel has shown concern about the company’s current P/E ratio, which it considers high given the company’s growth outlook. The company’s 2025 forecast reflects moderate revenue growth of almost 5% from a year ago, while the P/E ratio of the stock is high in view of the below-average growth prospects.
International Business Machines Corporation (NYSE:IBM) offers integrated services and solutions to enterprises. The company is a leading provider of global hybrid cloud and AI, and consulting expertise.
