Why Wall Street Is Quietly Buying Software Stocks Again Amid the AI Boom

Wall Street quietly rebuilds software stakes

Wall Street is quietly increasing its exposure to software stocks. The shift is driven by rational valuations and a growing realization that artificial intelligence is a market shift rather than a business killer, according to D.A. Davidson analyst Gil Luria.

The software sector faced heavy skepticism over the past year. Investors worried that artificial intelligence would render traditional seat-based licensing obsolete.

According to D.A. Davidson, the primary disruptions to the industry so far have been narrative-driven fears and hesitant customers rather than fundamental business failures. As companies recognize that neither their operations nor their software vendors have been overwhelmed by artificial intelligence, institutional capital is returning to infrastructure and specialized growth plays.

Analyst firms outline 2026 stock picks

Analyst firms including D.A. Davidson, Piper Sandler, and Truist Securities have outlined distinct stock picks for a sector recovery heading into 2026.

D.A. Davidson highlights Commvault with a price target of $220, citing momentum and margin recovery. Other selections include Manhattan Associates with a target of $250, Zeta Global at $29, Box at $45, and Datadog at $225 for its observability platform in complex environments, according to Luria’s research notes.

Infrastructure and SaaS transition winners

Piper Sandler analyst James Fish focuses on infrastructure and SaaS transition winners.

He points to Rubrik with a $75 price target, Nutanix at $50 following market share gains from VMware, and Axon at $563 for its public safety recurring model.

Shifting from seat licenses to consumption billing

Meanwhile, Truist Securities analyst Terry Tillman notes that software pricing models are evolving away from human-dependent seat licenses toward consumption-based billing.

As autonomous AI agents execute tasks around the clock, billing tied directly to usage metrics like compute and transactions becomes a more logical method for capturing value.

Cloud franchises and contracted backlogs

Truist highlights ServiceNow with a price target of $781, JFrog at $65, and Snowflake with a $220 target as key beneficiaries of the transition toward consumption-driven models.

These vendors are betting that increased data processing and automated transaction volumes will outweigh any declines in human software seats. Institutional accumulation in major cloud franchises is also visible elsewhere in the market, with Microsoft, Alphabet, and Amazon maintaining heavy institutional ownership as multi-quarter capital expenditure commitments show up in contracted backlogs.