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.
8. Palo Alto Networks, Inc. (NASDAQ:PANW)
Number of Hedge Fund Holders: 85
Palo Alto Networks, Inc. (NASDAQ:PANW) is one of the best AI stocks in the software industry to buy now. On January 29, Palo Alto Networks, Inc. (NASDAQ:PANW) reported that it has acquired Chronosphere to address a major challenge in the AI era, which is the lack of clear visibility and security over the huge volumes of data used by modern businesses.
Chronosphere helps customers see activity across their entire digital estate. With this deal, Palo Alto Networks, Inc. (NASDAQ:PANW) will be able to help organizations operate at the speed of AI by offering deep, real-time visibility into applications, infrastructure, and AI systems. The company highlighted that this approach will allow customers to keep control over data costs and value.
Palo Alto Networks, Inc. (NASDAQ:PANW) plans to integrate its Cortex AgentiX platform with Chronosphere’s cloud-native observability platform to enable AI agents to automatically identify and resolve security and IT issues before they can impact the customer.
Previously, on January 20, Citizens reiterated its Market Outperform rating on Palo Alto Networks, Inc. (NASDAQ:PANW) with a $250 price target. The firm pointed out that executives from private cybersecurity companies believe that it is difficult to challenge large platforms like Palo Alto Networks, Inc. (NASDAQ:PANW). One executive described the company as being in a strong position, saying it is “their market to lose” if they can “massively mess it up.”
Citizens also pointed to comments from a co-founder of an identity and network security company, who said that “nothing has changed in the competitive landscape in deals.” The co-founder also said that Palo Alto Networks, Inc.’s (NASDAQ:PANW) expanded platform capabilities are “helpful” as customers “still want to consolidate single vendors in cybersecurity.”
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leading American multinational cybersecurity software and platforms company that provides comprehensive AI-powered security solutions across network, cloud, security operations, and AI.
7. Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 88
Adobe Inc. (NASDAQ:ADBE) is one of the best AI stocks in the software industry to buy now. On January 26, UBS reduced its price target on Adobe Inc. (NASDAQ:ADBE) from $375 to $340 and maintained its Neutral rating on the stock.
On January 14, Baird also lowered its price target on Adobe Inc. (NASDAQ:ADBE) from $410 to $350 and kept a Neutral rating on the stock.
Earlier, on January 9, BMO Capital downgraded its rating on Adobe Inc. (NASDAQ:ADBE) from Outperform to Market Perform and cut its price target from $400 to $375. This update comes after BMO Capital’s seventh proprietary Creative Cloud survey, which showed rising competition in the creative software market. This is affecting smaller businesses, students, and freelance users.
BMO Capital noted that while Adobe Inc. (NASDAQ:ADBE) offers an “undemanding” current valuation, it does not see any clear positive catalysts for the company. According to the research firm, shares are expected to stay range-bound. Despite the downgrade and the reduced price target, the firm maintained its financial forecasts for the company.
Adobe Inc. (NASDAQ:ADBE) is a global leader in digital media and digital marketing solutions. It provides creator tools and services to individuals, teams, and enterprises to create, publish, and promote content.
6. MongoDB, Inc. (NASDAQ:MDB)
Number of Hedge Fund Holders: 89
MongoDB, Inc. (NASDAQ:MDB) is one of the best AI stocks in the software industry to buy now. On January 30, BofA Securities raised its price target on MongoDB, Inc. (NASDAQ:MDB) from $480 to $500 and kept its Buy rating.
The research firm pointed to MongoDB, Inc.’s (NASDAQ:MDB) Atlas business, which reported 30% year-over-year revenue growth in the third fiscal quarter, compared with 29% in the second quarter. BofA Securities also highlighted the company’s successful dual strategy of top-down enterprise sales and bottom-up product-led growth. The firm noted that MongoDB, Inc. (NASDAQ:MDB) continues to expand its product portfolio for AI and modernization of legacy applications.
Earlier, on January 20, Stifel analyst Brad Reback also reiterated a Buy rating on MongoDB, Inc. (NASDAQ:MDB) following the company’s user conference in San Francisco. During the event, the company announced several new AI capabilities.
The firm’s analyst pointed out that MongoDB, Inc.’s (NASDAQ:MDB) Atlas users will now be able to directly use Voyage AI models. This will strengthen the platform’s AI capabilities and add more value for existing users.
MongoDB, Inc. (NASDAQ:MDB) is an American software company that is known for its globally distributed database platform that supports applications with integrated capabilities for operational data, search, real-time analytics, and AI-powered data retrieval.
5. Snowflake Inc. (NYSE:SNOW)
Number of Hedge Fund Holders: 102
Snowflake Inc. (NYSE:SNOW) is one of the best AI stocks in the software industry to buy now. On January 30, DA Davidson reiterated its Buy rating on Snowflake Inc. (NYSE:SNOW) with a $300 price target, citing value in carefully buying software companies that can overcome the pressures being faced by the broader software sector.
DA Davidson said it does not want “to fight the holy war quite yet,” but believes some software stocks stand out. The research firm noted that Snowflake Inc. (NYSE:SNOW) is a company that could “break the doomsday narrative more easily” than other companies. DA Davidson pointed out that its assessment was “simple and brief,” adding that it did not include any “material checks or analysis” to its existing outlook on the company.
Also on January 30, BofA reduced its price target on Snowflake Inc. (NYSE:SNOW) from $310 to $275 and maintained a Buy rating. The firm said that the company is still “one of the fastest growing stories in software” and named it a top pick in infrastructure software.
According to BofA, the main question is whether Snowflake Inc. (NYSE:SNOW) can maintain product revenue growth in the “high 20%s Y/Y” or even “reaccelerate into the 30s.” The firm said that this is “well within reach,” pointing to a growing product portfolio, AI tailwinds, and increasing spending from customers. BofA’s analyst said that the “blizzard is just starting to form on broad AI adoption, and we think Snowflake Inc. (NYSE:SNOW) will play a foundational role.”
Snowflake Inc. (NYSE:SNOW) is an American cloud-based data platform company. It offers an AI Data Cloud platform, which enables organizations to build, use, and share data, applications, and AI.
4. ServiceNow, Inc. (NYSE:NOW)
Number of Hedge Fund Holders: 104
ServiceNow, Inc. (NYSE:NOW) is one of the best AI stocks in the software industry to buy now. On January 30, Bernstein reiterated its Outperform rating on ServiceNow, Inc. (NYSE:NOW) with a price target of $219 after a sharp market sell-off.
Bernstein said that ServiceNow, Inc. (NYSE:NOW) now presents a “discount large cap growth” opportunity, pointing out that it appears relatively cheap compared with other large software companies with more than $50 billion in market cap when looking at the three-year growth against the price-to-free-cash-flow. The firm also noted that the usual premium given to growth stocks has “collapsed further,” which makes ServiceNow, Inc.’s (NYSE:NOW) even wider when compared to other large-cap growth software stocks.
On January 29, Cantor Fitzgerald also maintained its Overweight rating on ServiceNow, Inc. (NYSE:NOW) with a price target of $200 after the company’s quarterly earnings report.
Also on January 29, Stifel reduced its price target on ServiceNow, Inc. (NYSE:NOW) from $200 to $180 but kept its Buy rating following the company’s latest quarterly results, which led the stock to fall in after-hours trading.
Stifel analyst Brad Reback pointed out that the quarter “played out largely as expected,” with an organic upside of around 100 basis points. He noted that fourth-quarter checks were “somewhat mixed.”
The research firm noted that ServiceNow, Inc. (NYSE:NOW) offers “an interesting value” at current levels, trading at about 6 times revenue and 16 times free cash flow. However, Stifel highlighted that a broader shift in investor sentiment would be needed for the stock to be re-rated, and said that “what drives that shift remains unclear.”
ServiceNow, Inc. (NYSE:NOW) is an American software and technology company. It provides an AI platform that helps organizations digitize, automate, and manage workflows for enterprise operations.
3. Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 119
Salesforce, Inc. (NYSE:CRM) is one of the best AI stocks in the software industry to buy now. On January 27, Citizens reiterated its Market Outperform rating on Salesforce, Inc. (NYSE:CRM) with a price target of $405. The firm noted that the company’s Agentforce business surpassed $500 million in annual recurring revenue during the company’s fiscal third quarter, marking an increase of 330% year-over-year.
Citizens pointed out that existing customers are coming back to “refill the tank,” suggesting expanding consumption of Agentforce. The research firm also said its checks with partners confirm solid demand and a strong pipeline for Salesforce, Inc. (NYSE:CRM). Agentforce is being used in enterprise settings including Olive, the AI Sous Chef for Williams Sonoma, and Pepsi, where “massive efficiencies” were reported with gains of 25% to 30% after implementation of the service.
In other news, on January 26, Salesforce, Inc. (NYSE:CRM) reported that it had been awarded a $5.6 billion contract by the US Army. The deal is a 10-year Indefinite Delivery Indefinite Quantity (IDIQ) contract that will allow the Army and the Department of War to use the company’s trusted data fabric and compliant cloud technologies.
As per the report, Salesforce, Inc. (NYSE:CRM) will help support agentic enterprise, improve decision-making, streamline operations, and enhance support for warfighters, civilian personnel, industrial base partners, and dependents.
Salesforce, Inc. (NYSE:CRM) is a leading American AI cloud-based software company that specializes in customer relationship management (CRM) solutions. The company offers software, tools, services, and applications for sales, customer service, marketing, e-commerce, and analytics.
2. Oracle Corporation (NYSE:ORCL)
Number of Hedge Fund Holders: 122
Oracle Corporation (NYSE:ORCL) is one of the best AI stocks in the software industry to buy now. On January 23, Morgan Stanley reduced its price target on Oracle Corporation (NYSE:ORCL) from $320 to $213 and kept its Equalweight rating.
Morgan Stanley pointed to worries about the company’s GPU-as-a-Service (GPUaaS) business. The firm believes that this represents a significant opportunity for Oracle Corporation (NYSE:ORCL). However, the buildout could push the company’s earnings per share below its targets. The research firm warned that the GPUaaS expansion is expected to drive “materially higher funding needs.” Morgan Stanley sees a “balanced risk/reward” profile for Oracle Corporation (NYSE:ORCL) and noted that these risks are already reflected in the current share price.
Previously, on January 5, RBC Capital lowered the price target on Oracle Corporation (NYSE:ORCL) from $250 to $195 and maintained its Sector Perform rating. According to the firm, 2026 is likely to be a year when the benefits of AI become clearer for companies that are well-positioned to benefit from enterprise AI adoption. However, RBC Capital noted that companies that are less prepared could continue to face pressure because of the “AI is the death of software” narrative.
Oracle Corporation (NYSE:ORCL) is an American multinational computer technology company specializing in database software, cloud infrastructure, and enterprise software solutions. The company offers one of the industry’s broadest and deepest suites of AI-powered cloud applications.
1. Microsoft Corporation (NASDAQ:MSFT)
Number of Hedge Fund Holders: 312
Microsoft Corporation (NASDAQ:MSFT) is one of the best AI stocks in the software industry to buy now. On January 29, Raymond James reduced its price target on Microsoft Corporation (NASDAQ:MSFT) from $600 to $580 and kept its Outperform rating after the company released its fiscal 2026 second-quarter results. The firm pointed out that Azure growth and guidance were about one percentage point less than what investors had expected.
Raymond James noted that Microsoft Corporation’s (NASDAQ:MSFT) Azure growth is being held back by the company’s own decisions to direct resources toward first-party applications and services and internal research and development efforts.
Also on January 29, Piper Sandler cut its price target on Microsoft Corporation (NASDAQ:MSFT) from $650 to $600 and maintained an Overweight rating. The firm noted that the company is still focusing on its broader platform, allocating capacity across Azure, first-party applications, and internal research and development instead of focusing only on Azure growth.
Piper Sandler believes that demand for Microsoft Corporation’s (NASDAQ:MSFT) services is still exceeding supply, with Azure’s growth reflecting the capacity that the company has allocated rather than end customer demand.
The firm also noted that Microsoft Corporation (NASDAQ:MSFT) is increasingly directing capital toward short-lived assets like GPUs and CPUs to deal with near-term capacity limits. Piper Sandler is still positive on the company and highlighted strong commercial remaining performance obligation growth of $625 billion including OpenAI, which is an increase of 110%. The research firm believes Microsoft Corporation (NASDAQ:MSFT) is in a good position to benefit from additional AI-related workloads.
Microsoft Corporation (NASDAQ:MSFT) is an American technology company that specializes in AI-powered cloud, productivity, and business solutions. The company develops and markets software, services, and hardware.
While we acknowledge the potential of MSFT 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 MSFT and that has a 100x upside potential, check out our report about this cheapest AI stock.
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