Software stocks experienced a major selloff on Tuesday amid fears that the rapid advances in artificial intelligence will soon challenge the demand for traditional software licenses and workflows.
We are not yet at the point where AI agents will destroy software companies, especially given concerns around security, data ownership and use, but this market rout suggests the potential disruption that is on the cards for markets in the coming days, weeks and months. There is a lot of uncertainty around exactly what AI agents can do, and as such investors are choosing to shun the software market altogether, leaving nowhere to hide.
Ben Barringer, head of technology research at wealth manager Quilter Cheviot
Nvidia CEO Jensen Huang has dismissed these fears that AI will replace software and related tools, calling the idea “illogical.” Huang believes that worries related to AI making software companies less relevant are misguided and that the technology will continue to rely on existing software rather than rebuild basic tools from scratch.
There’s this notion that the tool in the software industry is in decline, and will be replaced by AI … It is the most illogical thing in the world, and time will prove itself, Huang said.
Huang asked if someone was a human or robot, would they rather use tools or reinvent them. The answer, Huang noted, is to use tools. This is why the latest breakthroughs in AI are about tool use, since the tools are designed to be explicit.
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. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 76
Marvell Technology, Inc. (NASDAQ:MRVL) is one of the 10 Buzzing AI Stocks on Market Radar. On February 3, Benchmark analyst Cody Acree reiterated a Hold rating on the stock, maintaining its forecast with no FY27 change.
Bechmark’s rating follows Marvell’s Monday announcement that it has completed its previously announced acquisition of Celestial AI, an optical interconnect technology supplier for scale-up connectivity.
The firm noted that its FY27 expectations remain unchanged as previously announced, with Marvell anticipating initial revenue from Celestial AI to begin in the second half of fiscal 2028.
The revenue will begin with a relatively small contribution in the third quarter of that year, before ramping to $125 million in the fourth quarter with a $500 million annualized run rate.
Benchmark added that at this point, revenue contribution should fully offset the dilutive impact of increased operating expenses, lower interest income, and increased share count dilution.
For fiscal year 2029, Marvell projects that revenue from Celestial AI to continue ramping throughout the year and to exit Q4FY29 at $250 million, or a $1 billion annualized run rate.
Marvell Technology, Inc. (NASDAQ:MRVL) develops and manufactures semiconductors, with a heavy focus on data centers.
9. Palantir Technologies Inc. (NASDAQ:PLTR)
Number of Hedge Fund Holders: 81
Palantir Technologies Inc. (NASDAQ:PLTR) is one of the 10 Buzzing AI Stocks on Market Radar. On February 3, Deutsche Bank analyst Brad Zelnick raised the price target on the stock to $200.00 (from $160.00) while maintaining a “Hold” rating. The firm sees shares as increasingly palatable but remains cautious on valuation.
The firm noted that even though it admires the company and this bias is reflected in its target price, valuation remains difficult to justify as investors increasingly scrutinize software companies for stock-based compensation.
Shares are increasingly becoming attractive at 70 times enterprise value to unlevered free cash flow based on 2027 estimates. However, including SBC this is more like 93x, which is why the firm hopes for a better entry point.
Deutsche Bank acknowledged the company’s growing $7.2 billion cash hoard alongside a relatively small $75 million share buyback planned for calendar year 2025.
We do believe the possibility of Palantir growing into its multiple is becoming more likely. Finally, we acknowledge the company’s growing $7.2bn cash hoard with a de minimis share buyback ($75mn in CY25) is attracting attention from shareholders desirous of capital returns. We remain Hold rated almost entirely on valuation and maintain our DCF-derive TP of $200.
Palantir Technologies Inc. (NASDAQ:PLTR) is a leading provider of artificial intelligence systems.
