Bank of America has turned more bullish on a select group of software companies, lifting price targets on ServiceNow, Adobe, Workday, and others. The move reflects growing investor confidence that traditional software firms can capitalize on artificial intelligence rather than be disrupted by it.
ServiceNow shares jumped 6.5% on Wednesday, leading gains across the software sector. The iShares Expanded Tech-Software Sector ETF rose 1%, while Figma, Workday, and Adobe each gained between 3% and 4%.
AI monetization potential drives target hikes
Analyst Tal Liani raised ServiceNow's price target to $150 from $130, reiterating a Buy rating. He highlighted the company's access to historical data and customer workflows as a key advantage in the emerging field of agentic AI—systems that can perform complex tasks autonomously.
ServiceNow's platform manages workflows across HR, employee onboarding, and other internal processes, giving it deep insight into how organizations operate. Liani believes this knowledge positions the company to benefit as businesses deploy AI agents.
He also noted ServiceNow's second-quarter performance, which exceeded expectations for current remaining performance obligations and subscription revenue growth.
Other target increases include Figma to $33 from $30, Workday to $205 from $140, Adobe to $220 from $190, Amplitude to $14 from $12, and Snowflake to $395 from $330.
OpenAI growth concerns ease disruption fears
Another factor supporting software stocks is a growing sense that the AI threat may be less immediate than feared. Recent data points from OpenAI have been "mixed," according to Raymond James analyst Adam Tindle, potentially reducing pressure on traditional software providers.
The Wall Street Journal reported that OpenAI's revenue rose to $6.7 billion in the June quarter, up 18% from the prior quarter, but its operating loss widened to $12.3 billion. CNBC also reported that OpenAI's CFO told employees the revenue run rate was up 35% quarter to date.
Tindle said these developments could reduce the "existential perceived threat" that AI might eliminate software-as-a-service businesses.
Software seen as beneficiary of enterprise AI
Benchmark analyst Yi Fu Lee told MarketWatch that the market is beginning to see software as a beneficiary of enterprise AI deployment rather than a victim. He named ServiceNow his top large-cap software pick, noting investors are rewarding companies with tangible evidence of AI adoption and monetization.
Lee also highlighted ServiceNow's cybersecurity business, which crossed $1 billion in annual contract value last year, as an additional growth driver as companies manage AI-related security risks.
The broader shift in sentiment comes amid a backdrop of rising Treasury yields, which have pressured growth stocks. However, software names have shown resilience as investors focus on AI-driven fundamentals. For more on how yields are affecting tech, see AI infrastructure stocks slide and Dow slips on yields.
While BofA remains selective, the target hikes signal confidence that these companies can turn AI into revenue. As the market digests mixed signals from AI leaders, traditional software firms may continue to gain favor.
This article is for informational purposes only and does not constitute financial advice.
