Jim Cramer, the host of Mad Money, said on Friday that he wants to help viewers find buying opportunities in software stocks that have sold off too aggressively. To do that, non-small-cap software and tech services companies were screened, with a focus on ones that are down at least 25% from 52-week highs, trade at discounts to the S&P 500, grow earnings faster than the market, and remain profitable. Out of 176 companies in the sector, only 23 met all of those conditions.
If you own any software stocks, the last couple of weeks have been… hard… for your portfolio. Look at the iShares Expanded Tech-Software Sector ETF… It’s down over 30% from its September highs and 15% just in the last week and a half. Like I’ve told you before, a lot of this comes down to AI worries. These generative AI platforms are great at writing code, making it easier for big companies to develop their own software in-house. And at the same time, AI helps businesses do more with fewer employees, which is a problem for enterprise software firms that charge per user. Lately, we’ve seen a bunch of big announcements from Anthropic, the company behind Claude, which keeps rolling out AI tools that can potentially replace all sorts of non-revenue-generating jobs, and that’s caused Wall Street to give up on the enterprise software cohort en masse.
READ ALSO: Jim Cramer Commented on These 14 Stocks and Jim Cramer Looked At These 7 Stocks Recently.
Cramer said it has happened even when many of these companies post good quarterly results, which he emphasized has often been the case, and despite that, share prices have continued to slide. He noted that the selling has become so severe that, in some instances, high-quality companies are being tossed aside along with weaker ones, something he said he has been waiting to see. He added that he does not like every name in the group.
Here’s the bottom line: Yes, AI will hurt many enterprise software companies, but when you look at how much these stocks have already come down, I think there are real buying opportunities here as long as you stick with high-quality merchandise, especially cybersecurity stocks that simply shouldn’t be trading with the rest of the group like they are.
Our Methodology
For this article, we compiled a list of 9 stocks that were discussed by Jim Cramer during the episode of Mad Money aired on February 6. We listed the stocks in the order that Cramer mentioned them. We also provided hedge fund sentiment for each stock as of the third quarter of 2025, which was taken from Insider Monkey’s database of 978 hedge funds.
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).
Jim Cramer Identified 9 Software Stocks as Potential Undervalued Buys
9. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Number of Hedge Fund Holders: 66
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is one of the software stocks that Jim Cramer named as potential undervalued buys. Cramer noted that the trust is sticking by the stock despite the decline, as he said:
Now, here’s two that I just say, time to buy. We own Palo Alto Networks and CrowdStrike for the Charitable Trust. We’re sticking with them even though these stocks are down 29 and 30% from their highs, respectively. These are the top two consolidators in the cybersecurity space, and they’re so important to their customers that I see little or no possibility of or threat of AI disruption. I think that they could… work hand in hand with AI. If anything, AI means more business for them, though, because this new technology gives bad actors powerful tools to hack into your networks.
You almost never get a chance to buy Palo Alto or CrowdStrike at deep discounts, so if you don’t own them already, I would pounce. Of all the stocks mentioned, these two are my favorites because Anthropic cannot possibly duplicate or even improve on what they have built. We bought some CrowdStrike into this dip because the decline is way out of whack with the company’s prospects. We know that it might not bottom here, but sometimes you have to take a bit of risk with high-quality franchises.
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) provides cloud-based cybersecurity solutions. The company offers protection for endpoints, cloud systems, identities, and data.
8. Okta, Inc. (NASDAQ:OKTA)
Number of Hedge Fund Holders: 55
Okta, Inc. (NASDAQ:OKTA) is one of the software stocks that Jim Cramer named as potential undervalued buys. Cramer highlighted that the stock was not a part of the list, as he commented:
Beyond that, I like three beaten-down cybersecurity names, because I think security’s important enough that most companies won’t want to experiment with having AI make their own in-house replacements. First is Okta, and they didn’t initially make the list because it’s only expected to have 7% earnings growth this year. It’s kind of unusual for this good company. But not long ago, CEO Todd McKinnon told me that Okta has a huge opportunity securing thousands, if not millions, of AI agents that are being created within the enterprise, and that resonated with me, frankly. With the stock selling for just 23 times this year’s earnings, it’s probably worth nibbling at.
Okta, Inc. (NASDAQ:OKTA) provides identity management and security solutions through products that enable secure access, authentication, and governance across cloud and on-premises systems. Cramer mentioned the company during the October 16, 2025, episode and remarked:
While we’re out here in San Francisco, it’s worth digging into why this market’s gotten so hostile to enterprise software, even the parts of the sector that previously seemed like ironclad… cyber security. Take Cramer family favorite, Okta, the leader in identity verification. These guys have excellent numbers and a very strong business. The last couple of quarters showed good strength, yet the stock’s actually down more than 30% from its highs in May. In fact, it’s even below where it bottomed after Liberation Day in April. No matter what Okta does right, it doesn’t seem like the market cares.
