Hot Picks: Generative AI wave opens new opportunities for select software stocks

Investors seeking exposure to the next phase of generative AI adoption may find opportunity in select software names. An analyst points to accelerating enterprise investment in AI-driven applications and data-heavy workloads as a structural tailwind for the sector.

BNN Bloomberg spoke with Tyler Radke, senior equity research analyst at Citi, who highlighted three software stocks he believes are well positioned to capture rising demand as organizations modernize legacy systems and scale AI-enabled applications.

Key Takeaways

• Generative AI adoption is increasing demand for software platforms capable of supporting larger, more complex data workloads.
• Faster application development and modernization are driving greater reliance on flexible databases and analytics tools.
• Enterprise AI and machine-learning initiatives are shifting spending toward platforms that unify data management and simplify querying.
• Productivity gains from AI assistants and co-pilot tools are reinforcing steady demand for cloud and software services.
• Customer upgrades to higher-tier software plans are improving long-term revenue visibility across the sector.

Read the full transcript below:

ANDREW: Now it’s time for Hot Picks, and our guest has MongoDB as his top idea. He says the company is set to benefit from the growing use of generative AI. He says as companies build and launch more of these applications, they will rely more on Mongo’s databases. We’re joined by Tyler Radke, senior equity research analyst at Citi. Thanks very much for joining us. Tyler, can you remind us: What does MongoDB actually do, and how does it fit into the AI business?

TYLER: Yeah, so MongoDB is a provider of databases. Databases are essentially the foundation for building applications. So everything from a traditional SaaS application like a Salesforce.com to a mobile application, to something that might be customer-facing or back-office-facing — all of those need a database to store, manage and run that data.

This is a very large market today — over US$100 billion. Obviously you have companies like Oracle dominating the space. But I think what’s really interesting about Mongo is one of the big breakthroughs we’ve seen on the AI side is just how easy it is to write code. You’ve seen many of these code-completion, AI-assisted coding startups really drive explosive growth, and the output per developer has increased by orders of magnitude.

So what does that mean? It means more lines of code are being generated. You need more databases to store and manage this data. And I think the pace at which you’re modernizing legacy applications — applications that were written 20 or 30 years ago — is becoming a little bit easier and happening faster. So we think that can be an accelerant to growth.

They reported earnings earlier this week. We saw their Atlas cloud revenue accelerate to more than 30 per cent. They have a new CEO who’s bringing in, I think, a lot of Fortune 500 relationships. So we think there are a lot of positive tailwinds ahead for the business.

ANDREW: Snowflake is seen as another winner in AI. Remind us what they do and what their AI angle is, please, Tyler.

TYLER: Yeah, sure. So similar to MongoDB, they are in the data space. They specialize more in data for analytics and for doing business intelligence and those types of use cases, as opposed to databases. So these are two distinct markets.

It’s been a very high-growth business since its IPO. They did report last night and kind of missed expectations after the bar was pretty high — as you can see, the stock has had a good run this year. But their secret sauce on AI is basically that I think they’ve done one of the best jobs of embedding AI capabilities into their products.

What does that mean? Typically, if you looked at Snowflake in the past, you would have to be an expert in writing SQL queries. You would have to know how to code and be a more technical user of the product. Today, you can use their Snowflake Intelligence product very much like you and I would interact with a natural-language search or ChatGPT. You can ask questions about the data that sits under Snowflake.

So this is opening up a wider range of users who can engage with the product, and they make money based on the number of queries you have. We’re seeing growth rates accelerate. I think this quarter was a little bit of a blip, but we expect them to return to growing revenue over 30 per cent next quarter.

ANDREW: That’s interesting. So you get billed on the number of queries your employees put through?

TYLER: Exactly — and it’s similar for Mongo. And I think these are the reasons why these are some of our top picks. The software sector has been under a lot of pressure, and there’s a lot of uncertainty around what software applications are going to look like long term.

Many traditional software businesses — Salesforce, Workday, etc. — charge based on seats, on the number of users. And there’s uncertainty about what white-collar jobs will look like, what knowledge-worker or developer headcount will look like. But we do know data volumes are increasing. We think the number of queries is going to grow. Structurally, these business models and their technology are just better positioned for what’s coming.

ANDREW: And finally, what many people would see as an old reliable in software — Microsoft. What is particularly catching your eye about this name right now, Tyler?

TYLER: Yeah. Look, I think Microsoft, in our view, should be a core mega-cap holding. That’s been our view for the last five years, and I think it’s generated amazing returns. Clearly, the stock has pulled back a good amount from its highs. I think any time you get these pullbacks, they’re great times to add.

Specifically on the business, what gives us conviction is if you look at last quarter — well, yeah, maybe you could say the Azure growth was a little underwhelming — we were really impressed by the bookings. Commercial bookings meaningfully accelerated. They’re signing a lot of large deals; some are with OpenAI, but a lot are with large corporate clients.

We think that as they get new capacity on these power shells stood up, you’re going to see Azure revenue growth accelerate. We think this company can grow earnings per share well over 20 per cent over the coming years. They’re well positioned on AI and doing everything right in terms of operating with discipline. They’re holding operating margins. They’re not going into more speculative businesses. And we think that can drive compounding growth over time.

ANDREW: Tyler, we better leave it there. Thank you very much.

TYLER: Thank you.

ANDREW: Tyler Radke, senior equity research analyst at Citi.

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This BNN Bloomberg summary and transcript of the Dec. 4, 2025 interview with Tyler Radke are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.