Investor appetite for software businesses is fueled by diversification benefits, sustainable revenue, innovation, and growth prospects. In this rapidly evolving technological landscape, software companies are extending substantial resources to diversify their service offerings and achieve scalability.
However, the debate over AI’s significant impact on the software industry still seems to hog most of the limelight. On that front, Fidelity International, Australia, noted in a February 13 report that the situation is not as challenging for large, incumbent enterprises. In the report, they stated:
“AI is reshaping how software is built and used, but it does not erode the core moats of leading platforms: systems of record, workflow ownership, proprietary data, compliance, deep industry knowledge and trust. Companies such as SAP, Sage and RELX are embedding AI to enhance automation, insight and productivity, driving faster growth rather than disintermediation. High switching costs, regulatory demands and existing customer relationships further protect incumbents. As with past innovations, AI is expanding software’s total market, acting as an additive layer, not a replacement.”
Supporting the sector’s outlook, on February 3, business and technology insights company Gartner Inc. shared its 2026 outlook for global IT spending. The firm expects a double-digit year-on-year growth rate of 10.8% in technology spend, amounting to roughly $6.2 trillion for the year. The firm also shared a breakdown of capital allocation towards data center systems, devices, software, IT services, and communication services. Gartner’s VP Analyst John-David Lovelock stated:
“AI infrastructure growth remains rapid despite concerns about an AI bubble, with spending rising across AI‑related hardware and software. Demand from hyperscale cloud providers continues to drive investment in servers optimized for AI workloads.”
Given the above spending trends, one can expect impressive growth across the segment during 2026. With that background, let’s explore our 12 Oversold Software Stocks to Invest In.
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Our Methodology
To identify relevant stocks for this article, we screened U.S.-listed software companies with market capitalizations above $2 billion. We then added a filter to shortlist companies with a Relative Strength Index (RSI) below 30. Next, we identified stocks with at least 60% upside potential based on TipRanks consensus as of the February 16 close. Finally, we selected 12 stocks with the highest upside and ranked them in ascending order.
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).
12. Adobe Incorporated (NASDAQ:ADBE)
Number of Hedge Fund Holders: 88
Upside Potential: 61.4%
Adobe Incorporated (NASDAQ:ADBE) is one of the 12 oversold software stocks to invest in.
On January 14, Robert Oliver of Baird reiterated his Neutral rating on Adobe Incorporated (NASDAQ:ADBE). In the process, he also lowered the price target from $410 to $350. Despite the downward revision, the stock still offers an upside potential of almost 33%.
On January 5, Brent Thill from Jefferies downgraded his rating for Adobe Incorporated (NASDAQ:ADBE) from Buy to Hold. He reduced his price target on the stock from $500 to $400, yielding a revised upside of more than 51%.
Thill’s rating adjustment came as part of Jefferies’ revisions to the software segment based on the 2026 outlook. The firm recommends investors remain underweight on the software segment, pointing towards moderating growth and better opportunities in other areas like semiconductors. It expects another year of gradual AI monetization, noting that stronger AI-related growth will be needed to ease concerns about potential disintermediation.
Adobe Incorporated (NASDAQ:ADBE) is a global technology company that focuses on digital media and marketing solutions. It offers tools for creating, publishing, and promoting content, as well as managing documents. It also operates a platform that allows businesses to measure and monetize customer experiences based on marketing, advertising, and analytics.
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