In this article, we highlight the best software infrastructure stocks to buy according to hedge funds.
An estimated $45 trillion opportunity may emerge in the software application layer as AI infrastructure spending moves up the stack, according to Byron Dieter, Partner at Bessemer Venture Partners. Dieter joined CNBC on December 29, 2025, to discuss his outlook for 2026. He compared the current AI cycle to the early days of cloud computing, where spending first flowed into data centers, compute, and core infrastructure before moving to the software applications layer.
As data center investment accelerates, with billions already pouring in, Dieter estimates a 9x multiplier to gauge the implied enterprise value of software, given that software companies are the downstream beneficiaries of data center spending. On being asked about the software companies that have underperformed in 2025 and the “AI versus Software Trade”, Dieter argued that while many traditional software and SaaS stocks have struggled recently, he does not believe they are obsolete. He further said,
“There’s going to be a separation there. Who are the beneficiaries of AI that are going to lead the next cycle versus those that aren’t going to make the transition? And so, if you look at a ServiceNow or Aviva, I think those are names that are really interesting to watch, to see how they incorporate AI. And I think that there’s a little bit of value left there that they’re under their peer group. You look at some companies like Cloudflare and Applovin, even Snowflake, and at their current values, they’re the high fliers in this kind of genuine ecosystem.”
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Supporting this view in a recent CNBC interview, George Kurtz, Founder and CEO of CrowdStrike, pushed back against the idea that AI will replace software altogether. Addressing the “AI is killing software” narrative, Kurtz dismissed the idea, arguing that software remains essential to securing AI systems. He argued,
“I think you need software in order to be able to protect AI, and they are interrelated. It’s not like you just have one without the other. So, for me, I don’t really buy into that narrative. I think it’s only going to help companies like ours, we are AI, but we are also a SaaS company. The way we deliver security and AI, protection is through our software. So, I think you have to have both.”
With that broader software and software infrastructure backdrop in mind, let’s explore the best software infrastructure stocks to buy according to hedge funds.
Our Methodology
To identify stocks for this article, we began by screening U.S.-listed software infrastructure companies with market capitalizations over $2 billion whose core business is foundational infrastructure software platforms. We then used Q3 2025 data from Insider Monkey’s database to determine hedge fund ownership and narrowed the list to the 12 most widely held names. Finally, the stocks were ranked in ascending order by the number of hedge funds holding positions.
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 427.7% since May 2014, beating its benchmark by 264 percentage points (see more details here).
Note: All pricing data is as of market close on January 9, 2025.
12. F5 Inc. (NASDAQ:FFIV)
Market Cap: $15.6 Billion
Number of Hedge Fund Holders: 40
F5 Inc. (NASDAQ:FFIV) is among the best software infrastructure stocks to buy according to hedge funds. On January 5, RBC Capital Markets upgraded F5 to Outperform from Sector Perform and raised its price target to $325 from $315, implying a further 27% upside potential.
This upgrade came after substantial erosion in the stock’s value over the last few months following a security incident in October. According to RBC’s analysis, the financial impact of the incident for the company will be lower than initially estimated. Moreover, the firm also believes that consensus now factors in the headwinds, which reduces downside uncertainty around the near-term execution.
For context, F5 Inc. (NASDAQ:FFIV) disclosed a severe, long-term security breach on October 15, 2025, raising serious concerns about the risk to critical infrastructure. The breach was first detected in August 2025 and was primarily related to the stealing of source code and internal data associated with BIG-IP products. While the company has been taking steps to mitigate risks and rebuild trust, the share price has declined by up to 35% since the incident became public.
As of the close of January 5, F5 Inc.’s (NASDAQ:FFIV) stock is down approximately 25% since mid-October, and RBC views this correction as a favourable entry opportunity.
Apart from this incident-related concern, RBC highlighted several medium-term growth drivers that could support a re-rating. These include potential tailwinds from cloud repatriation, early monetization opportunities from AI-driven workloads, and F5’s continued emphasis on security-oriented solutions. The firm also pointed to increased private data center investment as a favorable demand driver.
F5 Inc. (NASDAQ:FFIV) provides core application delivery and security infrastructure through its Application Delivery and Security Platform (ADSP). The company enables the delivery and security of applications and APIs across on-premises, edge, and hybrid and multi-cloud environments.
11. Nutanix Inc. (NASDAQ:NTNX)
Market Cap: $14.4 Billion
Number of Hedge Fund Holders: 47
Nutanix Inc. (NASDAQ:NTNX) is among the best software infrastructure stocks to buy according to hedge funds. Earlier this week, RBC Capital lowered its price target on Nutanix (NASDAQ:NTNX) to $65 from $74. While the exact drivers of the lower price target are not known to us at this time, the revision appears to be driven by near-term momentum rather than any shift in underlying long-term conviction, as the firm has maintained its Outperform rating on the stock.
RBC expects 2026 to be a year where clear benefits will be visible for software companies that are structurally positioned to benefit from enterprise AI adoption. On the other hand, those companies that remain exposed to the “AI is the death of software” narrative are expected to lag. The RBC analyst acknowledges that management teams across the sector are entering 2026 with conservative guidance. At the same time, he noted that enterprise spending trends appear to be stabilizing, and GenAI-driven innovation is driving improvements across many areas.
Notably, in an early December report, RBC Capital had noted an increase in merger & acquisition (M&A) activity with software deal volume “up well over 50%” year-to-date compared to last year. Among a list of twenty potential takeover targets, he named Nutanix Inc. (NASDAQ:NTNX) a leading candidate in the infrastructure, security, and analytics space.
Nutanix Inc. (NASDAQ:NTNX) hybrid multi-cloud computing company that offers a single platform for running applications and managing data across clouds.
