We recently published a list of 10 Best Performing Software Stocks to Buy According to Analysts. In this article, we are going to take a look at where Semrush Holdings, Inc. (NYSE:SEMR) stands against other best performing software stocks to buy according to analysts.
The global software market has witnessed tremendous growth over the past few decades, emerging as a key driver of productivity, economic expansion, and technological advancement. Software, in its broadest sense, includes a diverse range of programs and applications that power computers and other digital devices, enabling them to perform specialized tasks. These range from basic operating systems to sophisticated enterprise solutions and even cutting-edge quantum computing technologies.
The rapid expansion of the software industry is driven by increasing digital transformation, the widespread adoption of mobile technology, and continuous innovations in fields like artificial intelligence (AI). Additionally, with cyber threats and data breaches becoming more frequent and sophisticated, businesses are placing greater emphasis on data security and privacy. This has fuelled the rising demand for cybersecurity solutions, including encryption technologies, compliance tools, and advanced security applications, as the software sector continues to evolve to address these critical concerns.
According to an August 2024 report by Precedence Research, the global software market was valued at approximately $737 billion in 2024. Their projections suggest that it will surge to $2.25 trillion by 2034, reflecting a compound annual growth rate (CAGR) of 11.8%. The U.S. software market, one of the largest globally, is expected to reach $676 billion by 2034, growing at a CAGR of 12% between 2024 and 2034.
To put the current software market in perspective, Michael Wilson, CIO & Chief U.S. Equity Strategist at Morgan Stanley, shared his insights in a February 11 CNBC interview, discussing the near- to mid-term equity market outlook. While he anticipates market volatility over the next 3–6 months, he highlighted that software stocks have recently outperformed semiconductors. He attributes this shift to the growing diffusion of AI and the expansion of the application layer, which have driven greater investor interest in software. Although the semiconductor sector has experienced a temporary slowdown, Wilson emphasizes that it remains a cyclical industry rather than one in permanent decline. He also noted that advancements such as the DeepSeek AI-model announcement could renew excitement in AI and shift the focus back to software infrastructure.
With AI and machine learning becoming integral to various industries, the software market presents a compelling investment opportunity. Companies that demonstrate strong innovation in AI applications and have the potential to disrupt traditional industries are particularly well-positioned for long-term success.
Our Methodology
To determine the 10 best-performing software stocks to buy according to analysts, we began by screening all U.S.-listed software companies with a market capitalization above $300 million and a stock price over $10, eliminating smaller and more volatile stocks. Next, we identified companies with year-to-date (YTD) returns of at least 20%, refining the selection further to include only stocks with a potential upside of 10% or more. Finally, we ranked the top 10 stocks based on YTD returns, placing the highest-performing ones at the top. Additionally, we also included data on hedge fund holdings in these companies as of Q4 2024 to provide further insight into investor interest.
Note: All pricing data is as of market close on February 25.
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 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Bespoke software code running on a computer terminal, displaying the complex nature of the software-as-a-service platform.
Semrush Holdings, Inc. (NYSE:SEMR)
YTD returns: 27%
Potential Upside: 20%
Number of Hedge Fund Holders: 27
Semrush Holdings, Inc. (NYSE:SEMR) offers a software platform that helps businesses enhance their online presence (services commonly known as SEO (Search Engine Optimization)). The platform enables companies worldwide to identify and timely engage with their target audience through the right channels. By collecting and analyzing vast amounts of data from millions of sources, the company provides valuable insights into market trends, helping businesses refine their strategies, improve products, and optimize marketing efforts.
After a weak 2024, where its share price declined 13%, Semrush Holdings, Inc. (NYSE:SEMR) has rebounded strongly in 2025, gaining 27% YTD. This momentum has been largely driven by multiple analyst upgrades and new coverage in early January. On January 13, a Morgan Stanley analyst upgraded the stock to Overweight from Equal Weight, increasing the price target from $17 to $20. The analyst sees Semrush Holdings (NYSE:SEMR) as a leader in online visibility management, with significant growth potential in the enterprise market. They believe that easing pressures on small businesses and freelancers, along with improving profit margins, could support a sustained 20% revenue growth—an opportunity the market has yet to fully appreciate.
On January 14, Northland analyst Luke Horton initiated coverage on Semrush Holdings (NYSE:SEMR) with an Outperform rating and a price target of $18, further reinforcing the positive sentiment around the stock.
Overall, SEMR ranks 4th on our list of best performing software stocks to buy according to analysts. While we acknowledge the potential of SEMR to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than SEMR but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.