AI isn’t a ‘business destroyer’: The reason Wall Street is investing in software shares in 2026

Software's Demise Is Overstated

Rumors about the end of the software industry have been blown out of proportion. According to Gil Luria, an analyst at D.A. Davidson, if artificial intelligence were truly threatening to upend businesses, the warning signs would already be apparent—especially as the sector enters its third year of adapting to AI advancements.

Luria notes that the most significant effect on software so far has been a shift in sentiment, with nervous customers hesitating to make commitments. However, this trend may be reversing as organizations realize that neither they nor their software providers have been overtaken by AI.

AI Infrastructure Leaders Poised for Growth

As confidence returns to the market, analysts from D.A. Davidson, Piper Sandler, and Truist Securities have identified companies likely to spearhead the industry's resurgence. A unifying theme among their selections is that these firms supply the foundational infrastructure powering AI technologies.

• D.A. Davidson's Top Picks: Luria favors companies with specialized growth and robust infrastructure. His standout for 2026 is Commvault (CVLT), projecting over 50% potential upside and a $220 price target, thanks to ongoing momentum and improving profit margins.
• Other Noteworthy Stocks: Manhattan Associates (MANH), which specializes in supply chain and retail software, is highlighted as a "subscription acceleration story" with a return on invested capital exceeding 100% and a $250 price target. Zeta Global (ZETA), a marketing platform benefiting from the shift away from outdated marketing technologies, is assigned a $29 target.
• Additional Contenders: Box (BOX) is gaining traction through its "Enterprise Advanced" upgrades, with a $45 target, while Datadog (DDOG) is recognized as a comprehensive observability platform for complex AI environments, with a $225 price target.

Piper Sandler and Truist Securities: More Picks

• Piper Sandler's Perspective: Analyst James Fish is focusing on companies positioned to benefit from the next generation of AI and infrastructure. He points to Rubrik (RBRK) with a $75 target following its SaaS transition, Nutanix (NTNX) at $50 as it captures market share from VMware, and Axon (AXON) at $563 for its recurring revenue model and integration of drones in public safety.
• Truist Securities' Analysis: Terry Tillman observes that skepticism about software often revolves around traditional seat and license pricing, with concerns that AI-driven efficiency could reduce demand for licenses. However, he argues the industry is evolving, with the rise of autonomous AI agents prompting a move toward usage-based pricing models.

The Shift to Usage-Based Pricing

Tillman explains that as workflows transition from human-initiated actions to autonomous agents operating continuously, billing based on actual usage becomes the most effective way to capture value. This is especially relevant for services like computing, data processing, and transactions, as AI agents can generate billable activity around the clock.

Companies Embracing the New Model

• ServiceNow (NOW) is identified as a leader in the early stages of this transformation, with a $781 price target.
• JFrog (FROG) is highlighted as being midway through the transition, with a $65 target.
• Snowflake (SNOW) is considered the benchmark for a fully consumption-based model, with a $220 price target.

These companies are betting that as AI adoption accelerates, the resulting increase in data processing and transaction volume will more than compensate for any reduction in human users.

Why Wall Street Is Investing in Software Again

Looking ahead to 2026, investors are returning to software not because of renewed hype, but because valuations have become more reasonable, customers are regaining confidence, and the anticipated "business killers" have yet to materialize.