The AI spending spree is likely to continue in 2026 as companies continue to build infrastructure to power future AI applications. Yet the software infrastructure that will power these investments tomorrow isn’t getting anywhere near the same attention. Analysts have now started pointing out this gap, especially since the iShares Semiconductor ETF (NASDAQ:SOXX), with its 53% one-year returns, significantly outperformed the iShares Expanded Tech-Software ETF’s (BATS:IGV) 9.1% returns.

On January 11, Gabriela Borges, an analyst at Goldman Sachs, pointed out the revenue acceleration opportunity that AI infrastructure will bring for software companies. For Borges, Microsoft and Oracle present the obvious opportunities, with both companies leading the software world when it comes to AI. Microsoft has an inherent advantage because of its solid user base and penetration into enterprise infrastructure. Oracle already has a future deal pipeline worth over $500 billion.

At the end of December, Byron Deeter, who is a partner at Bessemer Venture Partners, talked to CNBC on the ‘Squawk on the Street’ show. He called 2026 ‘the year of AI software’. His reasons were quite similar to the opportunity that Goldman Sachs analyst Gabriela Borges presented:

”As you look at the coming trillions of dollars of data center spend… there’s about a 9x multiplier that comes for implied Enterprise value of software, because they are the downstream customers of the data centers ultimately.”

He argued that a massive $45 trillion in software and application-layer value could trickle down to these companies over the next several years. It is this extraordinary value that prompted us to identify 15 software stocks with the highest upside potential.

Our Methodology

To identify the 15 Software Stocks With the Highest Upside Potential, we compiled a list of software stocks with a market cap of at least $2 billion using Finviz stock screener. We then assessed their potential upside using CNN’s compilation of Wall Street analyst ratings, selected and ranked the top 15 by median upside.

Additionally, we have mentioned the hedge fund sentiment for each stock using Insider Monkey’s Q3 2025 hedge fund database.

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).

Note: All pricing data is as of market close on January 13, 2026.

15. SoundHound AI, Inc. (NASDAQ:SOUN)

Potential Upside: 41.55%

Number of Hedge Fund Holders: 22

SoundHound AI, Inc. (NASDAQ:SOUN) has entered 2026 on a strong footing, drawing increased attention from the Wall Street analysts. Scott Buck from H.C. Wainwright reiterated his price target of  $26 for the stock, while maintaining a Buy rating on January 13. His price target offers an impressive upside of 134.66% from the current levels. The analyst forecasts a potential rally of more than 100% over the next year, driven by growing demand for AI-driven voice technology.

Buck reiterated his bullish stance after meetings with the company management at CES 2026 in Las Vegas. At the event, SoundHound highlighted its Vision AI technology, which integrates real-time visual perception with voice AI, as well as its  Agentic+ platform that enables businesses to rapidly deploy custom AI agents.

The analyst pointed to strong demand across several industries, mainly automotive and service, supported by both channel and direct sales, as well as upselling opportunities from acquired customers. Management expects adjusted EBITDA to break even by the end of 2026, while continuing to prioritize growth over short-term margins.

SoundHound AI, Inc. (NASDAQ:SOUN) is an independent voice artificial intelligence (AI) solutions developer that enables businesses to deliver high-quality conversational experiences to their customers. The company’s products include the Houndify platform, SoundHound Chat AI, and SoundHound Smart Answering.

14. Varonis Systems Inc (NASDAQ:VRNS)

Potential Upside: 42.86%

Number of Hedge Fund Holders: 37

On January 13, Citi analyst Fatima Boolani reiterated her Hold rating while lowering the firm’s price target for Varonis Systems Inc (NASDAQ:VRNS) stock from $40 to $37. The adjusted price target implies a 5.96% upside from current levels. Additionally, the analyst also initiated a “downside 90-day catalyst watch” on Varonis. The firm noted that competitive pressures in the data security market are intensifying. According to the firm, these pressures pose a potential risk to the company’s upcoming earnings report. Citi’s more cautious short-term outlook for the stock was driven by this risk.

Cantor Fitzgerald cut its price target for the stock from $60 to $50 on January 7. However, analyst Jonathan Ruykhan maintained his Buy rating for the shares. The analyst discussed the firm’s 2026 outlook for Security & Infrastructure Software in a research note to investors. The outlook highlights increasing demand driven by artificial intelligence, signs of improving deal sizes, and broad optimism around short-term cybersecurity spending. Cantor Fitzgerald also anticipates identity, cloud, and AI security to be the fastest-growing areas within the sector.

Varonis Systems, Inc. (NASDAQ:VRNS) operates as a software products and services provider. The company’s software protects both unstructured and structured data across laaS, SaaS, and on-premises environments. It works with organizations across healthcare, technology, financial services, manufacturing, education, and other industries.

13. Core Scientific, Inc. (NASDAQ:CORZ)

Potential Upside: 46.48%

Number of Hedge Fund Holders: 68

On January 6, investor commentary highlighted growing investor confidence around Core Scientific, Inc.’s (NASDAQ:CORZ) growth outlook. Founder and partner at Gullane Capital Partners and a primary investor in Core Scientific, Trip Miller, expects the company to deliver 400 MW of data center capacity to new clients in 2026. He was among those opposing the company’s $9 billion acquisition by CoreWeave (NASDAQ:CRWV) last year. But now he believes that Core Scientific is close to securing several new deals.

According to the report, Trip Miller commented, highlighting that the CoreWeave deal had undervalued the company:

”I think over the next 90 days, you’ll see them announce greater than a hundred megawatts of deals. It would show that there was a lot more value to be tapped there than we were getting paid for under the CoreWeave deal.”

CoreWeave announced plans to acquire Core Scientific for $9 billion in July 2025, but several major investors, including Miller, opposed the deal. The acquisition failed to secure enough votes at a shareholder meeting in late October. Subsequently, multiple investment firms upgraded the stock.

According to a report released on January 6, the firm received an upgrade from KeyBanc. The financial services firm upgraded the stock to a Buy and assigned it a target price of $23. The price target implies a 41.63% upside from current levels.

Core Scientific, Inc. (NASDAQ:CORZ) operates as a digital asset mining services provider across the United States. The company operates through the Digital Asset Hosted Mining, Digital Asset Self-Mining, and HPC Hosting segments. It provides software solutions, digital infrastructure, and services.