AI startup Anthropic’s Claude Cowork AI agent is designed to simplify everyday tasks, including searching, assembling and organizing files. The company released add-ons last week to make it more helpful for users in the legal, sales, finance, data, marketing and customer support areas.
Concerns that these tools could disrupt traditional software and digital automation providers have spooked investors, sending legacy software and software-as-a-service (SaaS) stocks into disarray, and the decline continues. this S&P North America Technology Software IndexSoftware stocks, including more than 100 software stocks, have fallen into bear market territory, plunging more than 30% from their peak in early September.
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While some investors think the sky is falling, many experts disagree. At an event last week, NVIDIA “There’s this idea that the software industry is in decline and will be replaced by artificial intelligence. It’s the most illogical thing in the world,” said CEO Jensen Huang.
Wedbush analyst Dan Ives, a veteran of the tech industry, also thinks the sell-off is overdone, arguing that companies are unlikely to abandon the software and infrastructure they’ve invested in for decades, especially unproven or risky technologies. This creates buying opportunities for some of the most respected tech stocks. Let’s take a look at five.
Microsoft (NASDAQ:MSFT) Played an important role in triggering the artificial intelligence (AI) revolution. The software and cloud computing giant made a significant investment in ChatGPT parent company OpenAI and quickly developed a suite of AI-driven Copilots to help streamline business production and increase productivity. Microsoft is taking it a step further by integrating AI capabilities into a wide range of its products and services.
The company is a trusted brand among enterprise users, who are less likely to risk their future on unproven technology. Chief Financial Officer Amy Hood said its Azure cloud and artificial intelligence solutions are seeing widespread adoption as “demand continues to outpace supply.”
Microsoft’s stock price has fallen 25% from its peak (as of this writing), with a price-to-earnings ratio of 25 times. Ives has an outperform (buy) rating on Microsoft stock with a price target of $575, which implies a potential upside of 42% from Wednesday’s closing price.
mass strike (NASDAQ: CRWD) is a leading cloud-native cybersecurity expert with artificial intelligence in its DNA. The company is leading the way in protecting enterprise platforms and systems from artificial intelligence adversaries. That’s why it makes no sense for the stock to fall along with the broader software sector.
The company is AI-agnostic and its Charlotte platform is the gold standard for protecting domains, endpoints and identities. Additionally, CrowdStrike’s Falcon AI detection and response prevents attacks against generative AI tools and systems, and the need has never been greater.
CrowdStrike has fallen 25% from its peak and currently trades at 22 times sales. Ives has an Outperform (Buy) rating on the stock with a $600 price target, implying a potential upside of 44% from Wednesday’s closing price.
Cloud data management expert snowflake (NYSE: SNOW) Provides an AI-centric platform that sifts through large amounts of data in a threat-free environment to deliver actionable insights that help companies improve decision-making, increase productivity and better serve customers.
The company’s most advanced analytics tools and data warehousing solutions provide a platform that enables AI workflows to meet the needs of proprietary and sensitive enterprise information. As AI is adopted, demand for its services will increase, not the other way around, as it provides the security and control to protect company data. This will not be disrupted by advances in artificial intelligence, but will benefit from them.
Snowflake’s selling price has dropped 35% from its peak, selling for 13 times its original price. Ives has an Outperform (Buy) rating on the stock with a price target of $270, implying a potential upside of 51% from Wednesday’s closing price.
salesperson (NYSE: CRM) Pioneered customer relationship management (CRM) solutions and adopted artificial intelligence before it became popular. As a result, the company has accumulated decades of data, which is a strong moat. The company has launched its Agentforce suite of artificial intelligence agents. These in turn help streamline service, sales and marketing tasks.
Additionally, its Data 360 compiles data from disparate sources and delivers AI-driven insights without moving the data. All in all, the company offers a vast ecosystem of tools and solutions that have been developed over decades.
Salesforce has fallen 44% from its peak, with a price-to-earnings ratio of 25 times. Ives has an Outperform (Buy) rating on the stock with a price target of $375, implying a potential upside of 103% from Wednesday’s closing price.
Palantir Technology (NASDAQ: PLTR) is one of the most controversial stocks on the market today. It is the undisputed leader in providing data mining and artificial intelligence solutions to government and enterprise customers, and in many ways, its proven solutions are unmatched.
The company developed an artificial intelligence platform (AIP) that aggregates company data to provide real-time solutions to daily business problems. Unprecedented demand for AIP continues as it delivers proven return on investment (ROI) to enterprises. Palantir has few competitors when it comes to mission-critical use cases.
The stock has fallen 36% from its peak, mainly due to its overvaluation, with a price-to-earnings ratio of 210 times. Ives has an outperform (buy) rating on Palantir stock with a $230 price target, which implies 70% upside potential from Wednesday’s closing price.
Ives believes investors who only focus on current valuations will miss out on innovative, game-changing stocks like Palantir. He further said that Palantir is “becoming a multi-trillion dollar company” and hinted at a long-term upside of 209%.
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Danny Vena, CPA, has worked at CrowdStrike, Microsoft, Palantir Technologies and Snowflake. The Motley Fool has positions and recommendations at CrowdStrike, Microsoft, Palantir Technologies, Salesforce, and Snowflake. The Motley Fool has a disclosure policy.
Software Bear Market: The 5 best software stocks to buy now, with upside ranging from 42% to 209%, according to one Wall Street analyst Originally published by The Motley Fool