Software stocks might not be a very popular way to play the artificial-intelligence trade today, but that could soon change.
Prominent software stocks such as Salesforce and ServiceNow have fallen by more than 20% this year due to fears that AI will hurt their business models. And while Oracle and Microsoft shares have fared better and are in the green for the year, they’ve still underperformed the S&P 500.
HSBC analyst Stephen Bersey sees a shift coming as the infrastructure leg of the AI trade matures, and he believes these four overlooked stocks will soon rebound as they lead the charge in embedding agentic AI into software applications. All of the stocks have a buy rating at HSBC.
“Material productization of AI will mostly come from the software sector,” Bersey wrote in a Tuesday note. “We see 2026 as the year that investors begin to shift their focus from hardware to software positions.”
Bersey sees a “massive AI wave” that will favor vendors that already control corporate data. This could be a competitive advantage for Oracle, which houses vast amounts of sensitive business data through its database software offering. Oracle has developed a vectorized database, meaning that it translates complex business data into a numerical language that AI models can easily understand and search.
While Oracle’s stock has sold off recently, Bersey believes the negative sentiment comes from investors who haven’t fully grasped how important Oracle’s “data dominance” will be as companies look to train AI agents on their existing data that’s already stored with Oracle.
Bersey expects Oracle’s earnings per share to grow at a rate of over 25% annually from 2025 to 2030. He gives the stock a price target of $364, almost double current levels.
Microsoft also holds an advantage with its access to data from its enterprise customers, according to Bersey. Microsoft is building a vast “agentic ecosystem” to help businesses deploy AI agents on a large scale, he wrote. Its recent $45 billion deal with Nvidia and Anthropic allows the company to provide more model options to its Azure cloud-computing customers. Last quarter, Microsoft reported 40% year-over-year growth for Azure. Bersey gives the stock a price target of $667.
Pure-play enterprise-software names have struggled this year as investors look for more definitive evidence that AI can help these companies increase earnings. The selloff has created an opportunity to buy shares of Salesforce for cheap, as Bersey writes that the company is “significantly undervalued.” He gives Salesforce a price target of $336.
The company’s Agentforce offering allows businesses to build autonomous agents that can resolve customer-service tickets or evaluate sales leads without human help. Earlier in December, Salesforce reported operating income and earnings per share above consensus and suggested that revenue could reaccelerate to double-digit growth within 12 to 18 months.
ServiceNow, which provides a platform to manage digital workflows, is another software beneficiary of the AI trade, according to Bersey. The company aims to implement tools for AI governance. ServiceNow introduced its “AI Control Tower” feature earlier this year, which allows executives to track AI agents operating across the company.
However, the stock has been hit hard this week on rumors the company could potentially acquire cybersecurity player Armis. Investors worry ServiceNow might overpay to chase growth, while diverting resources from its core business.
Bersey gives the stock a price target of $1,332. Shares of ServiceNow will undergo a 5-for-1 stock split after market close on Dec. 17.
Comments