Software was supposed to eat the world.
Now investors are asking whether AI is going to eat software.
The worry makes sense. AI is changing how software is built, sold, and used. A lot of long-held ideas about how these businesses make money are being tested. Many software stocks have taken a hit as a result.
But not all software is the same.
In the latest episode of Ticker Take on YouTube, I spoke with Fatima Boolani, co-head of U.S. software research at Citi, about the companies she believes are best set up to win in the AI era.
And it has everything to do with plumbing! Let me explain.
Boolani says the real opportunity is in the software that runs in the background, not the software people use day to day. The apps people see on their screens are easier targets for new AI-driven competitors. The software that keeps everything running behind the scenes, what she calls the plumbing, is much harder to rip out and replace. And as more companies use AI, that plumbing matters more, not less.
So how does she spot winners?
Boolani has a clear recipe. She wants a product that is essential today and will only get more essential as AI use grows. She looks for companies with pricing power and strength in more than one area, not just one-trick ponies. She wants strong financials with room for growth. And she bets on management teams with a track record of steady execution. As she puts it, whose wagon are you hitching yourself to?
With that in mind, here are the five software stocks Boolani highlighted. As always, this is not financial advice.
Palo Alto Networks is one of the biggest names in cybersecurity, with a strong position across network, cloud, and endpoint security. Boolani says the company is well placed to handle new AI-related security needs, including the risks that come from AI agents acting on their own. She also points to its US$25 billion deal for CyberArk as a smart move that should help the company grow into more parts of the security market.
CrowdStrike is a leader in endpoint security and threat detection, and Boolani sees real upside as AI changes the way cyber threats show up. She points to a strong track record of meeting and beating expectations, with the core business still picking up speed. That history of delivering, she says, is a big reason investors stuck with the company through past challenges.
Datadog is not a traditional cybersecurity company, but Boolani sees it as a clear AI winner. The company helps businesses keep an eye on how their software and systems are running, which has become a much bigger job as cloud setups grow more complex. She points to large new deals, fast-growing future revenue, and strong product leadership as signs the company is benefiting directly from rising AI use.
Rubrik (RBRK)
Rubrik focuses on backup, recovery, and protecting companies from ransomware. Boolani says the company is in the right place at the right time, with data volumes climbing and cyberattacks becoming more common. She remains positive on the long-term story and continues to see plenty of room for growth ahead.
Cloudflare runs four different businesses, including network security, edge computing, performance, and content delivery. Boolani says the company is firing on all cylinders, with several parts of the business growing quickly at the same time. She also points to recent improvements in how it sells to large enterprise customers as a good sign for the next phase of growth.
The Ticker Take
It is easy to look at the software space right now and see a sector in trouble.
But Boolani’s approach is a reminder that disruption does not hit every company the same way. The businesses that handle the plumbing of the AI era — the security, the monitoring, the backup, the connectivity — are arguably becoming more important, not less.
Watch for those signs to spot companies that will not only survive, but potentially thrive.
Jon Erlichman is a BNN Bloomberg contributor and the host of Ticker Take on YouTube.
