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.
12. Remitly Global, Inc. (NASDAQ:RELY)
Potential Upside: 49.09%
Number of Hedge Fund Holders: 38
On January 8, Wolfe Research analyst Darrin Peller lowered the firm’s price target for the stock from $18 to $16 while maintaining a Buy rating. The adjusted price target implies a 19.4% upside from current levels as of January 9.
Goldman Sachs also presented a similar view on January 6. Will Nance, an analyst at Goldman Sachs, cut the price target on the shares from $19 to $17, implying a further 27% upside from here. The firm maintained its Buy rating on the stock.
The company held an Investor Day in early December to share its vision. Matt Oppenheimer, Co-Founder and CEO of Remitly, commented on the FY26 revenue growth expectations before the event:
”We continue to expect high-teens revenue growth. Revenue growth is expected to be driven by continued strength in core remittance business and growth from new products. In addition to that, today we are issuing an outlook for adjusted EBITDA in 2026 in the range of $300 million to $320 million. And at midpoint of the range, this translates into a margin expansion of approximately 150 basis points and a 30% year-over-year growth in EBITDA. We will balance growth, profitability, and investments into new products and customer categories.”
Remitly Global, Inc. (NASDAQ:RELY) is involved in the provision of digital financial services across Canada, the United States, and globally. The company provides cross-border remittances and complementary financial services through its website and mobile application.
11. Braze, Inc. (NASDAQ:BRZE)
Potential Upside: 49.65%
Number of Hedge Fund Holders: 34
On January 5, the company was added to Wells Fargo’s Q1 2026 Tactical Ideas List. Wells Fargo analyst Ryan MacWilliams pointed to expected momentum into early 2026 supported by a favorable mobile app development environment, potential fourth-quarter growth acceleration, and tailwinds from consumer AI use cases. The firm reaffirmed its Overweight rating and $45 price target for the shares.
Additionally, Scott Berg of Needham also reiterated a Buy rating on the stock on December 31. He also maintained the price target of $50 for the shares. The rating was based on the company’s strong competitive position and attractive growth outlook into CY26 and beyond. He named Braze as his top pick for 2026, citing a favorable environment for marketing and customer engagement software as enterprises begin to reallocate budgets toward GenAI-enabled engagement tools. He believes that the company’s largely consumer-focused customer base is well positioned to rapidly adopt and benefit from these new AI-driven capabilities, driving increased demand for its platform.
Berg also highlighted Braze’s operating performance as evidence of a durable growth profile not fully reflected in consensus forecasts. Trailing 12-month dollar-based net retention remains solid, running in the high single-digits above 100%. Based on this stability, Berg expects the company to reaccelerate to revenue growth above 20% in FY27.
Braze, Inc. (NASDAQ:BRZE) operates a customer engagement platform. The company’s platform offers interactions between consumers and brands globally. It was founded in 2011 and is based in New York, New York.
10. Commvault Systems, Inc. (NASDAQ:CVLT)
Potential Upside: 52.87%
Number of Hedge Fund Holders: 29
On January 12, KeyBanc cut its price target on Commvault Systems, Inc. (NASDAQ:CVLT) from $185 to $152. However, KeyBanc analyst Eric Heath maintained a Buy rating for the shares. The adjusted price target offers a further 22.5% upside from the current levels.
The firm explained that the price target revision reflects a modest decline in valuation multiples across competitors, rising competitive concerns, and increased caution regarding security-related spending budgets.
In contrast to KeyBanc, RBC Capital maintained its price target of $167 for the shares on January 5. Analyst Dan Bergstrom also reaffirmed a Buy rating on the shares. The firm’s price target implies a further 31.31% upside from the current levels.
On December 29, Stephens started covering the stock with a Buy rating. The analyst Todd Weller, CFA, assigned a price target of $162 to the shares, representing a further 30.6% upside from current levels. As per the analyst, the company is a well-established market leader that is successfully adapting to meet modern data protection needs. Moreover, the firm noted that the company is undergoing a dual transformation, transitioning its business model toward a Software-as-a-Service offering and modernizing its platform.
Commvault Systems, Inc. (NASDAQ:CVLT) is a cyber-resilience platform provider that protects and recovers data and cloud-native applications across the Americas and internationally. It was founded in 1996 and is based in Tinton Falls, New Jersey.
9. ServiceNow, Inc. (NYSE:NOW)
Potential Upside: 57.97%
Number of Hedge Fund Holders: 104
According to Piper Sandler’s January 5, 2026, outlook for Security and Infrastructure Software stocks, the stock is among the firm’s top 5 picks for 2026. Analyst Rob Owens and his team said that we remain cautiously optimistic for 2026, as many companies are well-positioned to emerge as long-term GenAI winners and are at attractive valuations.
The team of analysts highlighted that the primary reason behind the drop in valuation is growing investor concern over the sustainability of growth. This is driven by potential headwinds from seat-count trends affecting the business model, slower-than-expected AI rollouts, and challenges in key verticals, such as the Fed, that appear to be structural rather than cyclical.
Rob Owens and his team commented:
”Due to recent M&A as well as speculation regarding GenAI disruption, NOW has slipped to ~29x EV / NTM FCF, close to the lowest valuation we have seen for the company over the last five years (which was ~25x at the end of ’22).”
However, on January 5, the financial services firm lowered its price target on the shares from $230 to $200 while reiterating a Buy rating. The revised price target offers a further 47.6% upside from the current levels.
ServiceNow, Inc. (NYSE:NOW) operates as a provider of cloud-based solutions for digital workflows worldwide. It operates an AI platform known as the Now platform. The company serves financial services, manufacturing, technology, healthcare & life science, Public Sector, Telecom sectors, and other markets.
8. Rubrik, Inc. (NYSE:RBRK)
Potential Upside: 58.68%
Number of Hedge Fund Holders: 52
Fatima Boolani, an analyst at Citi, reaffirmed her Buy rating along with the price target of $115 for the stock on January 12. Additionally, she has added an “upside 90-day short-term view” on the company. According to the analyst, the firm expects Rubrik to deliver an annual recurring revenue (ARR) beat and sustain a mid-20% range sales growth outlook. The financial services firm highlighted that, at current levels, the stock offers an attractive risk/reward profile. This reflects Citi’s positive stance on both short-term performance and long-term growth potential.
Eric Heath at KeyBanc also maintained his Buy rating on the stock on January 12, while cutting the firm’s price target from $113 to $95. The revised price target implies a further 37% upside from current levels, which is consistent with the lowest Wall Street analysts’ upside, as per 26 analysts covering the stock.
The analyst said that the target price revision reflects modestly lower valuation multiples among peers, growing competitive pressures in the market, and increased caution around the security budgets. However, the firm still maintains a positive stance on the stock relative to the broader sector.
Rubrik, Inc. (NYSE: RBRK) is a data security solutions provider serving individuals and businesses globally. It offers unstructured data protection, SaaS data protection, enterprise data protection, cloud data protection, identity provider services protection, and other solutions. The company was founded in 2013 and is headquartered in Palo Alto, California.
7. Life360, Inc. (NASDAQ:LIF)
Potential Upside: 60.28%
Number of Hedge Fund Holders: 17
On January 9, Citi maintained its Buy rating on the stock while lowering its price target for the firm from $96.80 to $79.50. The firm’s revised price target offers an upside of 21.71% from current levels.
Using a mix of 65% cash and 35% stock, the company completed its previously announced acquisition of ad-tech specialist Nativo on January 2, 2026. On the other side, on January 5, Life360 reported that it had surpassed 50 million active monthly users in the U.S. The company intends to expand its digital advertising capabilities across connected TV, the Life360 app, and mobile & premium digital channels, through the integration of Nativo’s ad-tech and premium publisher network with its large first-party user base and location data.
Lauren Antonoff, Chief Executive Officer of Life360, highlighted the key milestone achieved by the company by saying:
”Surpassing 50 million monthly active users in the U.S. is a significant milestone that speaks to the trust families place in Life360. Families make countless decisions every day as they move through the world, and this partnership helps brands show up in those moments with relevance and respect. Together with Nativo, we’re building a differentiated advertising platform that connects brands to real families, in real moments, with real results.”
Life360, Inc. (NASDAQ:LIF) operates a technology platform that locates pets, items, and people across the Middle East, North America, Africa, Europe, and globally. It offers the Life360 mobile application, Life360 Platform, and a mobile-first technology platform. The company was founded in 2007 and is based in San Mateo, California.
6. Pattern Group Inc. (NASDAQ:PTRN)
Potential Upside: 63.27%
Number of Hedge Fund Holders: 24
Pattern Group Inc. (NASDAQ:PTRN) stock is up 15% in just a month, and a lot of that has to do with the company’s acquisition of Next Wave at the end of 2025. On December 18, Pattern Group Inc. (NASDAQ:PTRN) announced the acquisition of NextWave, a TikTok commerce agency focused on creator-led product discovery, live selling, TikTok Shop operations, and affiliate programs. The deal adds NextWave’s Creator Affiliate Partner capabilities, TikTok Shop Partner services, and access to more than 1,200 managed creators and 300,000 affiliates to Pattern’s ecommerce acceleration platform. Financial terms of the acquisition were not disclosed yet.
NextWave, which was founded by its CEO, Grace Yang, in 2022, has built a strong presence within the TikTok ecosystem, helping brands with content production, creator management, and TikTok Shop growth. The Los Angeles-based company operates teams both in New York and Los Angeles.
Dave Wright, Co-founder and CEO of Pattern, highlighted NextWave’s position in the TikTok ecosystem by saying:
”NextWave has built one of the most effective TikTok Shop and creator-commerce organizations in the industry.”
On December 11, a Jefferies analyst, John Colantuoni, lowered the firm’s price target on the shares from $21 to $20 while maintaining a Buy rating. The firm recommended a selective approach to Internet stocks, as incremental investment spending could pressure margins. While concerns over AI discrimination may limit valuation upside.
Pattern Group Inc. (NASDAQ:PTRN) accelerates different brands on e-commerce marketplaces through its proprietary technology and AI. The company purchases inventory from brand partners and sells directly to consumers in different industries, such as home & lifestyle, health &wellness, pet, beauty & personal care, consumer electronics, and sports and outdoors.
5. Netskope, Inc. (NASDAQ:NTSK)
Potential Upside: 69.28%
Number of Hedge Fund Holders: 44
On January 5, Piper Sandler provided its 2026 outlook for Security and Infrastructure Software stocks. The stock was among the financial services firm’s top stock picks for 2026. Supported by a generally stable demand environment for software, analysts expect the theme of ‘acceleration scarcity’ to continue into 2026. This outlook is tempered by ongoing uncertainty surrounding GenAI-related disruption. Heading into 2026, analysts said they prefer stocks with the potential to accelerate growth or maintain attractive growth rates, relative to expectations for slowing momentum.
Analyst Rob Owens and his team explained that the company is a modern SASE platform that leverages its private network and robust, granular controls, along with a deep understanding of context, to drive improved security outcomes. This combination offers the firm a credible right-to-win, enabling it to compete effectively alongside larger platforms in the market.
Analysts led by Rob Owens noted:
“We especially see NTSK as a strong fit for enterprises that need to secure agentic implementations across hybrid environments with more complex data security requirements.”
RBC Capital analyst Matthew Hedberg previously reaffirmed an Outperform rating on the stock and cut the price target from $27 to $23 on January 5. The adjusted price target implies a further 43.75% upside from here.
Netskope, Inc. (NASDAQ:NTSK) operates as a provider of networking, security, and analytics solutions to the largest enterprises and mid-sized companies globally. The company develops the Netskope One platform, which is a cloud-native platform for accelerating and securing the digital interactions of enterprises.
4. HubSpot, Inc. (NYSE:HUBS)
Potential Upside: 73.4%
Number of Hedge Fund Holders: 63
On January 13, Ryan Macwilliams of Wells Fargo maintained his Buy rating on the stock, along with the price target of $600. The firm’s price target offers a further 73% upside from the current levels. This upside is the same as that of the median Wall Street analysts’ upside, as per 38 analysts covering the stock.
In addition to Wells Fargo, Barclays also reiterated its Buy rating on the stock on January 12. However, the firm lowered its price target for the stock from $575 to $525, implying a further 50% upside from the current levels. The firm adjusted the target price as part of its broader update across the software sector tied to its 2026 outlook.
According to the analyst, the firm continues to see a favorable environment for the software stocks as 2026 approaches. Barclays also noted that the macroeconomic conditions and IT spending remain stable. The firm also noted that stock valuations across the sector are relatively low, while software equities are currently out of favor. Together, these factors create an attractive opportunity for long-term investors.
HubSpot, Inc. (NYSE:HUBS) operates as a cloud-based customer relationship management (CRM) platform provider. The company provides its CRM platform to businesses across Europe, the Americas, and the Asia Pacific. Its platform consists of Marketing Hub, Sales Hub, Service Hub, and Content Hub.
3. Datadog, Inc. (NASDAQ:DDOG)
Potential Upside: 73.58%
Number of Hedge Fund Holders: 72
In the first week of January, a number of financial services firms issued significant updates on the company. On January 7, Truist Financial analyst Miller Jump lowered its price target for the shares from $195 to $140. However, he reiterated his Hold rating on the stock. His downwardly revised price target implies a further 14.5% upside from current levels as of January 10. This upside is the same as the lowest estimate from Wall Street analysts.
In addition to Truist Financial, RBC Capital also cut its price target for the firm from $216 to $175 on January 5. Analyst Matthew Hedberg of RBC Capital revised the price target for the stock while maintaining a Buy rating. His adjusted price target represents a further 43% upside from the current levels.
However, on December 13, BTIG provided a 2025 review and 2026 outlook, and analysts led by Gray Powell added the stock to their 2026 list of favored names in security and infrastructure software.
Analyst Gray Powell and his team highlighted:
”We remain positive on the observability space. We see customers prioritizing vendor consolidation, benefiting both DDOG and Dynatrace. Vendors should see tailwinds from the proliferation of workloads from AI.”
Datadog, Inc. (NASDAQ:DDOG) operates a security and observability platform for cloud applications across the United States and internationally. Its products include log management, database monitoring, digital experience monitoring, data observability, continuous profiler, and more.
2. Via Transportation, Inc. (NYSE:VIA)
Potential Upside: 106.19%
Number of Hedge Fund Holders: 37
On January 8, Wells Fargo maintained its Buy rating on Via Transportation, Inc. (NYSE:VIA). However, Wells Fargo analyst Michael Turrin cut the firm’s price target for the shares from $60 to $40. The revised price target suggests a further 56% upside from the current levels. The firm said that AI remains “the name of the game” for 2026. Wells Fargo favors opportunities across infrastructure, innovation, and incumbents and expects long-term secular trends to drive performance despite uneven adoption.
Needham analyst Scott Berg reaffirmed a Buy rating on the stock, along with the price target of $55 for the shares, on December 16. The firm’s price target offers a further 115.35% upside from the current levels as of January 10. Scott Berg based his rating on Via Transportation’s strategic acquisition of Downtowner, which strengthens the company’s platform with features designed for markets affected by seasonal demand and weather-related disruptions. The acquisition broadens Via Transportation’s mix of public and private sectors and expands its reach into ski resort communities.
Via Transportation, Inc. (NYSE: VIA) is a digital public transportation platform provider operating in Germany, the United States, and globally. The company provides solutions in the areas of paratransit, non-emergency medical transport (NEMT), microtransit/on-demand public transit, student transportation, corporate/university shuttles, and health transportation.
1. Strategy Inc. (NASDAQ:MSTR)
Potential Upside: 157.88%
Number of Hedge Fund Holders: 43
During the previous week, Strategy Inc. (NASDAQ:MSTR) reported adding $1.25 billion worth of Bitcoin to its holdings. The company now holds a total of 687,410 Bitcoins. These investments in cryptocurrency often draw scrutiny, with Morgan Stanley Capital International (MSCI) previously contemplating whether a company with more than 50% of its assets in cryptocurrencies should be excluded from the index.
However, in a positive development, on January 7, MSCI announced it would not remove digital-asset treasury companies from its indexes. Following the announcement, the company’s shares rose 6.6% in after-hours trading.
However, MSCI plans to conduct a broader review of the treatment of non-operating companies in general. The company notes that its indexes are designed “to measure the performance of operating companies and exclude entities whose primary activities are investment-oriented in nature.”
The index provider commented:
”MSCI has determined at this time not to implement the proposal to exclude digital asset treasury companies from the MSCI Global Investable Market Indexes as part of the February 2026 Index Review.”
The company is currently listed in the MSCI USA, Nasdaq 100, and MSCI World indexes. JPMorgan analysts had previously cautioned that delisting the stock from MSCI’s equity indices could result in billions of dollars in outflows.
Previously, financial services firm Citi lowered its price target for the shares from $485 to $325 on December 21, 2025. Despite cutting the price target, Citi analyst Peter Christensen reaffirmed a Buy rating on the stock. His downward-adjusted price target suggests a further 105.74% upside from the current levels as of January 8.
Strategy Inc. (NASDAQ:MSTR) is a bitcoin treasury company across the Middle East, Europe, the United States, Africa, and globally. The Company also provides cloud-native, AI-powered enterprise analytics software to global customers.
While we acknowledge the potential of MSTR 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 MSTR and that has 100x upside potential, check out our report about this cheapest AI stock.
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