Slower AI Spending Could Be Good News for These 9 Software Stocks | Investing.com

• Software stocks held up against Monday’s tech sell-off.
• Calls to slow down AI development have led to a shift from chips to software.
• Discover 9 undervalued software stocks with strong upside potential.

The trading session on Monday, September 14, was tough for Wall Street, particularly for the tech sector, which was dragged lower by a sharp selloff in semiconductor stocks. Software, however, bucked the broader trend. The surged 5.04%, even as the fell 0.56% and the dropped 5.86%.

The resilience is notable. Of the 236 software stocks with market capitalizations above $1 billion tracked by the Investing.com screener, just 16.5% closed lower on Monday. Meanwhile, 19 stocks gained more than 10% during the session, led by cybersecurity names such as CrowdStrike () and Palo Alto Networks ().

Why software stocks weathered the storm

The main catalyst behind this rotation is artificial intelligence. Over the weekend, Anthropic CEO Dario Amodei called for a slower pace of development for the most advanced AI models, citing the growing risks they pose. The view was quickly echoed by OpenAI CEO Sam Altman and xAI founder Elon Musk.

For months, however, AI has been viewed as an existential threat to traditional software companies, as increasingly capable AI agents could eventually make some software products obsolete. Any slowdown in the AI race could therefore provide some relief for a sector that was heavily penalized earlier this year amid these concerns.

At the same time, the calls for greater caution have prompted investors to pull back from chipmakers, data center operators, and other AI infrastructure stocks whose valuations depend heavily on continued investment in the technology. Some of that capital has rotated into other areas of tech, particularly software, where recurring revenue and high margins provide a relatively more defensive profile.

The rotation has also been supported by a reassuring earnings season for software companies, with results showing that corporate demand remains resilient despite concerns over AI disruption.

Finally, AI is not simply a threat to the software sector. Many companies are already integrating AI into their products and could turn the technology into a significant growth driver. This is particularly evident in cybersecurity, where the growing threat of AI-enabled attacks is also driving demand for security solutions.

These software stocks remain significantly undervalued

Of course, some profit-taking cannot be ruled out on Tuesday given the magnitude of Monday’s rally. But looking beyond a single session, many U.S. software stocks remain significantly undervalued following the correction earlier this year. Their resilience even as the broader market comes under pressure provides another reason for investors to take a closer look at the sector.

We therefore turned to the Investing.com screener to identify U.S. software stocks that meet the following criteria:

• Software sector
• Market capitalization greater than $1 billion
• Up during Monday’s trading session
• Upside potential of more than 25% according to InvestingPro’s Fair Value, which synthesizes several recognized valuation models
• Upside potential of more than 40% based on the average analyst price target
• InvestingPro Financial Health Score above 2.5/5

This research has allowed us to identify 9 stocks:

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Specifically, these US software stocks show potential returns ranging from 25.8% to 43.2% based on Fair Value and from 40.8% to 74.3% based on analyst consensus.

Among these stocks are:

• Taboola () operates a performance-based advertising platform across the open web, recommending sponsored content to readers on thousands of media sites. The stock has rebounded on improving fundamentals this year. In the second quarter, gross profit excluding traffic acquisition costs rose 11.8% to $192.4 million, while adjusted EBITDA increased 22.8%, allowing the company to return to net income. Management raised its full-year targets for both metrics, driven by adoption of its Realize platform, and has repurchased nearly 20% of its shares since 2025.
• Klaviyo () develops a CRM platform for consumer brands, focused on email and SMS marketing and increasingly on AI-powered agents. The stock has lost about half its value over the past year despite continued strong growth. Second-quarter revenue jumped 26% to $370.6 million, while management raised its full-year revenue forecast to $1.53 billion. The main concern is profitability, with management lowering its margin outlook to fund investments and an acquisition. However, all the other stocks on the list offer greater upside potential based on Fair Value.

Disclaimer: This article is written for informational purposes only. It is not intended to encourage the purchase of any assets and does not constitute an offer, solicitation, recommendation, or advice to invest. I would like to remind you that all assets are evaluated from multiple perspectives and are highly risky; therefore, any investment decision and the associated risk are the sole responsibility of the investor. Additionally, we do not provide any investment advisory services.