AI startup Anthropic’s Claude Cowork AI agent was designed to simplify mundane tasks, including searching, assembling and organizing files. The company released plug-ins last week to make them more useful to users in legal, sales, finance, data, marketing and customer support.
Fears that these tools could upend traditional software and digital automation vendors have spooked investors, sending legacy software and software-as-a-service (SaaS) stocks into a tailspin, and the crunch is ongoing. The S&P North American Technology Software Indexwhich includes more than 100 software stocks, fell into bear market territory, down more than 30% from its peak in early September.
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While some investors believe the sky is falling, many experts disagree. At an event last week, Nvidia CEO Jensen Huang said: “There’s this idea that the software industry is in decline and will be replaced by AI. It’s the most illogical thing in the world.”
Wedbush analyst Dan Ives, a veteran of the tech sector, also thinks the sell-off is overblown, arguing that businesses are unlikely to abandon software and infrastructure they’ve invested decades in, especially for unproven or risky technology. This creates a buying opportunity for some of the most valued tech stocks. Let’s take a look at five.
Image source: Getty Images.
Microsoft(NASDAQ: MSFT) was instrumental in sparking the artificial intelligence (AI) revolution. The software and cloud computing giant invested heavily in ChatGPT, the parent of OpenAI, and quickly developed a suite of AI-based Copilots to help streamline business output and increase productivity. Microsoft has gone further, integrating AI capabilities into a broad cross-section of its products and services.
The company is a trusted name among enterprise users who are unlikely to risk their future on unproven technologies. Its Azure Cloud and AI solutions are experiencing robust adoption as “demand continues to outstrip supply,” according to CFO Amy Hood.
Microsoft shares are down 25% from their peak (as of this writing) and sell for 25 times earnings. Ives has an Outperform (Buy) rating and a $575 price target on Microsoft stock, implying a potential upside of 42% from Wednesday’s close.
CrowdStrike(NASDAQ: CRWD) is a leading cloud-native cybersecurity specialist that has AI in its DNA. The company is at the cutting edge, securing enterprise platforms and systems from attacks by AI-based adversaries. That’s why it makes so little sense that the stock has gone down with the broader software space.
The company is AI independent and its Charlotte platform is the gold standard for securing domains, endpoints and identities. Additionally, CrowdStrike’s Falcon AI Detection and Response protects against attacks against generative AI tools and systems — and the need has never been greater.
CrowdStrike is down 25% from its peak and trades at 22 times sales. Ives has an Outperform (Buy) rating and a $600 price target on the stock, implying a potential upside of 44% from Wednesday’s close.
Cloud data management specialist Snowflake(NYSE: SNOW) provides an AI-centric platform that sifts through reams of data in a threat-free environment, providing actionable insights to help businesses improve decision-making, increase productivity and better serve their customers.
The company’s state-of-the-art analytics tools and data warehousing solutions provide a platform where AI workflows meet private and sensitive company information. The need for its services will grow with the adoption of AI, not the other way around, as it provides the security and controls to protect company data. This will hardly be disrupted by AI improvements, but rather benefit from it.
Snowflake is down 35% from its peak and is trading at 13 times sales. Ives has an Outperform (Buy) rating and a $270 price target on the stock, implying a potential upside of 51% from Wednesday’s close.
Salesforce(NYSE: CRM) pioneered customer relationship management (CRM) solutions and adopted AI long before it was fashionable. As such, the company has collected data for decades, which serves as a strong moat. The company has already introduced its AI agent suite Agentforce. These, in turn, help streamline service, sales and marketing tasks.
Moreover, Data 360 compiles data from disparate sources and provides AI-based insights without moving the data. In total, the company offers a vast ecosystem of tools and solutions that have been developed for decades.
Salesforce is down 44% from its peak and sells for 25 times earnings. Ives has an Outperform (Buy) rating and a $375 price target on the stock, implying a potential upside of 103% from Wednesday’s close.
Palantir Technologies(NASDAQ: PLTR) is one of the most controversial stocks in the market today. It is an undisputed leader in providing data mining and AI solutions to government and enterprise customers alike, and in many ways its battle-tested solutions are second to none.
The company developed its Artificial Intelligence Platform (AIP), which aggregates company data to provide real-time solutions to everyday business problems. Unprecedented demand for AIP continues as it provides a proven return on investment (ROI) for businesses. When it comes to critical use cases, Palantir has virtually no competition.
The stock is down 36% from its peak, largely because of its flagrant valuation, trading at 210 times earnings. Ives has an Outperform (Buy) rating and a $230 price target on Palantir stock, implying a potential upside of 70% from Wednesday’s close.
Ives argues that investors who focus solely on current valuations are missing the boat on innovative, game-changing stocks like Palantir. He goes further to suggest that Palantir is on track to “become a trillion dollar market cap company,” suggesting long-term growth of 209%.
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Danny Vena, CPA has positions in CrowdStrike, Microsoft, Palantir Technologies and Snowflake. The Motley Fool has positions in and recommends CrowdStrike, Microsoft, Palantir Technologies, Salesforce and Snowflake. The Motley Fool has a disclosure policy.
Software Bear Market: 5 Best 42% to 209% Upside Software Stocks to Buy Right Now, According to 1 Wall Street Analyst was originally published by The Motley Fool
