5 stocks to buy now

Some of the world’s leading software franchises have been under extreme pressure in recent months as fears of AI disruption swept through the market. But beneath the surface, many of these companies have experienced little to no change in their underlying fundamentals. Revenue and earnings expectations remain strong for many, with expected top and bottom line growth still in the high teens to mid 20% range. Meanwhile, valuations across the sector have compressed to some of the most attractive levels in years.

Will artificial intelligence dramatically reshape productivity and business processes? Almost certainly. But that doesn’t mean the world’s leading software companies are suddenly on the path to obsolescence. Many of them are likely to be among the biggest beneficiaries of the AI ​​wave as they integrate new capabilities into their platforms and increase the value they provide to customers.

The iShares Comprehensive Tech-Software ETF (VAT) is down as much as 35% over the past few months, with many individual components down more than 50% over the same period. That kind of broad, indiscriminate selling often happens near turning points, when sentiment becomes excessively pessimistic.

Recently, however, the industry has begun to stabilize, and several leading software names are already showing signs of recovery. It is impossible to know whether the absolute bottom has been reached, but a number of high-quality companies are now trading at levels that offer attractive long-term expected returns.

One of the most attractive opportunities right now Salesforce (CRM), ServiceNow (NOW), AppLovin (APP), The Trade Bureau (T.D), and HubSpot (HUBS).

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Software companies have long benefited from some of the most attractive business models on the market, characterized by high margins, recurring revenue, minimal capital requirements and near-zero marginal costs. These benefits have allowed the industry to maintain premium valuations for years. Investors widely recognized the power of the model, and many leading software stocks traded at extremely high prices. Really, they were unsustainably high for many.

Even after the recent correction, some names in the sector still seem expensive. However, the sharp sell-off has returned some high-quality companies to much more reasonable levels, especially when viewed through a growth-at-a-reasonable-price (GARP) lens. For investors willing to look past the recent volatility, several leading software companies now offer attractive combinations of growth and valuation.

HubSpot is the only stock in the group that currently has a Zacks Rank #1 (Strong Buy) judgement. The shares trade at around 23.7x forward earnings, with revenue expected to grow in the top ten this year and next. Longer term, analysts expect earnings growth to be close to 19% annually over the next three to five years.

AppLovin has been one of the biggest winners in the market since 2023 thanks to its powerful position within the digital advertising ecosystem. The stock trades at around 32.6x forward earnings, with revenue expected to grow nearly 40% this year and around 30% next year, while earnings are expected to grow over 31% per year over the long term.

ServiceNow continues to achieve exceptional growth as companies expand their use of workflow automation and digital infrastructure tools. The shares trade at about 29.1x forward earnings, with revenue expected to grow about 20% this year and 18% next year, while analysts predict long-term earnings growth of about 24% per year.

Salesforceone of the fundamental companies in the SaaS industry, now trades at a much more modest forward earnings of 15.3x. While growth has naturally slowed as the company has matured, sales are still expected to grow 11% this year and 9% next year, with long-term earnings growth estimated at around 14% per year.

Finally, The Trade Bureau may represent the largest value opportunity in the group. The stock currently trades at around 14.3x forward earnings, with analysts expecting earnings to grow nearly 20% annually over the long term. Sales are expected to grow 13% this year and 14% next year, suggesting the company continues to deliver solid growth at a very reasonable valuation.

Artificial intelligence can even become a growth engine for software companies. Many of the industry’s leading platforms are deeply integrating AI into their products, automating workflows, improving decision-making and expanding customer capabilities. These developments could accelerate adoption and boost long-term opportunities for several major software names.

That said, the way people interact with software may evolve significantly as AI tools mature. There are no guarantees that current implementations will ultimately determine how software is used in the future. The key takeaway, however, is that many industry leaders are actively experimenting, integrating new technologies and demonstrating a willingness to innovate rather than resist the shift.

HubSpot has quickly integrated AI into its customer relationship management platform through its Breeze AI tools. These features help automate marketing content creation, customer responses, and sales prospecting workflows, allowing small and medium businesses to perform advanced marketing and sales activities with much less manual effort.

AppLovin uses AI within its AXON advertising engine, which uses machine learning to optimize ad targeting and maximize return on ad spend for mobile developers. The system continuously analyzes vast amounts of user behavior data to improve ad placements, and recent AI improvements have significantly improved advertiser performance and monetization for app developers.

ServiceNow integrates generative AI into its business workflow platform through Now Assist, which automates tasks such as resolving IT support, HR requests, and customer service activities. These AI tools help businesses reduce manual workloads while speeding up service response times in large organizations.

Salesforce has made AI a central pillar of its platform through Einstein AI and the new Einstein Copilot, which can analyze customer data, generate reports, automate workflows and help sales teams identify opportunities. By embedding AI directly into CRM processes, Salesforce transforms the way companies manage customer relationships and internal sales activities.

The Trade Desk integrates AI into its programmatic advertising platform to improve campaign optimization and audience targeting. AI-powered bidding and optimization tools allow advertisers to allocate budgets across channels more efficiently, while continuously refining targeting based on real-time performance data.

Taken together, these developments illustrate that, rather than being displaced by AI, many leading software companies are seeking to integrate it directly into their platforms, adapting to the shift while continuing to develop their products.

The recent sell-off in software stocks appears to have been driven largely by sentiment rather than a meaningful deterioration in fundamentals. Revenue growth remains strong among many of the industry leaders, and companies continue to enhance their platforms with new AI-driven capabilities.

At the same time, valuations have reset significantly after years of high valuations. For investors focused on growth at a reasonable price, several high-quality software companies are now trading at much more attractive levels.

While it’s impossible to know if the exact bottom has been reached, companies like Salesforce, ServiceNow, HubSpot, AppLovin, and The Trade Desk remain leaders in their respective markets and appear well-positioned to benefit from the next wave of AI-driven productivity gains. For investors looking to selectively increase their exposure to software after a deep correction, these stocks stand out as attractive opportunities.

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Salesforce, Inc. (CRM): Free stock analysis report

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This article was originally published on Zacks Investment Research (zacks.com).

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