10 Best Performing Software Stocks to Buy According to Analysts

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1. Cerence Inc. (NASDAQ:CRNC)

YTD returns: 50%

Potential Upside: 15%

Number of Hedge Fund Holders: 10

Cerence Inc. (NASDAQ:CRNC) develops AI-powered virtual assistants for the mobility and transportation industry, primarily serving the automotive sector.

The company endured a difficult 2024, with its stock plunging as much as 87% between January and mid-November before ending the year 60% lower. While Cerence Inc. (NASDAQ:CRNC) has been gradually losing market share to competitors and alternative technologies in recent years, the sharp decline was primarily triggered by an unexpected and significant downward revision of its full-year revenue guidance for 2024, as announced with its Q2 2024 results in May 2024.

Interestingly, investor sentiment shifted dramatically since mid-November after the company unveiled its Cerence Automotive Large Language Model (CaLLM) Edge, an embedded AI model designed to function independently, even without internet connectivity. This announcement sent the stock soaring threefold in just two days (November 21-22).

The momentum continued into early 2025 when Cerence Inc. (NASDAQ:CRNC) announced an expanded partnership with NVIDIA in January to enhance the CaLLM model using NVIDIA AI Enterprise, a cloud-native AI platform. Following this news, the stock surged 157% in the first four trading days of the year, reaching $20.2, before retreating to around $11.8, still up 50% YTD.

Despite the recent rally, analysts remain cautious about further upside, with a consensus price target suggesting a 12% potential upside, reflecting lingering uncertainties about sustainability of Cerence Inc. (NASDAQ:CRNC)’s long-term growth prospects.

While we acknowledge the potential of CRNC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than CRNC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.

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