On January 10, Yahoo Finance reported that concerns about “the death of software” because of AI may be greatly overstated. Analysts from Piper Sandler, Truist Securities, and DA Davidson pointed out that some software companies provide the infrastructure that supports AI and these could be potential beneficiaries as this “sacred” money comes back to the market.
Gil Luria from DA Davidson said that “if AI is going to kill a business, the signs would already be there.” The analyst noted that the industry is currently in its third year of the AI shift. Luria explained that the biggest effect of AI on the software sector so far has been “narrative and scared customers unwilling to commit.” He pointed out that this hesitation may be easing as companies realize that “neither they nor their software vendors have been run over” by AI.
James Fish from Piper Sandler expressed interest in the “Gen Z” winners and companies focused on infrastructure.
Meanwhile, Truist Securities analyst Terry Tillman said that these worries that are weighing on the software industry are based on the idea that AI-driven efficiency could reduce the need for companies to buy software licenses.
Tillman believes that the software industry is simply changing because the rise of agentic AI, which involves autonomous bots working continuously, encourages a move toward consumption-based pricing. He said:
“As workflows move from human-initiated tasks to autonomous agents executing at scale, billing tied to usage becomes the most logical way to capture value.”
With this background in mind, let’s take a look at the 10 best AI software stocks to buy right now.
Our Methodology
To compile our list of the 10 best AI software stocks to buy right now, we looked for the largest and most popular AI software companies. We reviewed Insider Monkey’s database of prominent AI stocks and various online resources to compile a list of the best AI software stocks. Next, we focused on the top 10 stocks that are favored by institutional investors. Data for the hedge fund sentiment surrounding each stock was taken from Insider Monkey’s Q3 2025 database of 978 elite hedge funds. Finally, the 10 best AI software stocks to buy were ranked in ascending order based on the number of hedge funds holding stakes in them as of Q3 2025.
Why do we care about what hedge funds do? 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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
10 Best AI Software Stocks to Buy Right Now
10. International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 66
International Business Machines Corporation (NYSE:IBM) is one of the best AI stocks in the software industry to buy now. On January 30, Bernstein analyst Mark C. Newman increased the price target on International Business Machines Corporation (NYSE:IBM) from $280 to $330 and kept a Market Perform rating after the company reported its fourth-quarter results.
The analyst noted that although International Business Machines Corporation (NYSE:IBM) has significant exposure to software and consulting sectors that could be pressured by AI-driven devaluation, the company’s valuation “has been remarkably resilient and continues to expand.” Bernstein’s updated sum-of-the-parts analysis indicates that “part of the long-term upside from IBM’s nascent Quantum business is already in the stock.”
On January 29, Stifel also raised its price target on International Business Machines Corporation (NYSE:IBM) from $325 to $340 and kept its Buy rating following the company’s fourth-quarter 2025 performance.
International Business Machines Corporation’s (NYSE:IBM) free cash flow stood out as a key positive. The company delivered a $0.7 billion, or 10%, outperformance in the quarter. The guidance for 2026 free cash flow also came in about $0.7 billion, or 4-5%, above market expectations.
The stock traded higher in pre-market trading and Stifel noted that it is now trading at around a 35% premium to the equal-weight S&P 500, in line with its trend over the past twelve months.
International Business Machines Corporation (NYSE:IBM) is an American multinational technology and software company that specializes in AI, software products, IT infrastructure, and consulting services.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 81
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the best AI stocks in the software industry to buy now. On January 22, Phillip Securities started covering Palantir Technologies Inc. (NASDAQ:PLTR), giving the stock a Buy rating and setting the price target at $208.
Phillip Securities noted that the stock could move higher as the company’s fundamentals improve and its total addressable market continues to grow. According to the research firm, Palantir Technologies Inc. (NASDAQ:PLTR) has “just” captured 2.4% of its $119 billion total addressable market estimated in 2020. With the company’s AI software growing at more than 25% a year, Phillip Securities noted that the addressable market has probably expanded, which supports “significant upside” for the stock.
Earlier, on January 6, Truist Securities also initiated coverage of Palantir Technologies Inc. (NASDAQ:PLTR), giving it a Buy rating and a price target of $223. The firm noted that the stock trades at a high valuation but highlighted the company’s strong opportunity to help governments and enterprises adopt generative AI.
Truist Securities pointed to improving momentum supported by the launch of Palantir Technologies Inc.’s (NASDAQ:PLTR) Artificial Intelligence Platform (AIP). In its initiation report, the research firm described Palantir Technologies Inc. (NASDAQ:PLTR) as a “best-in-class AI asset.”
Palantir Technologies Inc. (NASDAQ:PLTR) is an American software company that specializes in big data analytics and AI platforms. The company serves key government and commercial enterprises.
