In this article, we will discuss the 10 Hot Software Stocks with High Upside Potential.
As per MarkNtel Advisors, which is a leading consulting, data analytics, and market research firm, the US software market is expected to grow at a CAGR of ~7.17% over 2024 – 2030. Possessing a strong legacy of innovation and entrepreneurship, the US has been categorized as a world leader in software development, housing a thriving environment of startups, software corporations, and academic institutions. With businesses using technology to fuel creativity, productivity, and competitiveness, the broader US software market continues to move towards digital transformation throughout all industries.
In a bid to be more flexible, responsive to market demands, and scalable, it’s important to modernize legacy systems, procedures, and infrastructure apart from implementing cutting-edge technologies, says MarkNtel Advisors.
Emerging Trends in Software Industry in 2025
With software development evolving at a significant pace (thanks to technological innovation and dynamic business demands), businesses are required to stay ahead in a bid to remain competitive and deliver ground-breaking software solutions, says Datafortune. The rise of AI-powered development and low-code/no-code platforms, integration of DevSecOps practices, and sustainable software engineering are some of the key trends likely to shape software development in 2025.
AI-powered coding assistants, automation of tools, and intelligent debugging tools continue to transform the working infrastructure of developers. Datafortune believes that businesses are increasingly leveraging AI to automate workflows, accelerate software development, and enhance code quality.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Low-Code/No-Code Platforms and Sustainable Software Engineering
As per Datafortune, the demand for rapid application development continues to drive the adoption of low-code and no-code platforms. Such platforms allow business users and developers to develop applications with minimal or no coding, which makes software development more accessible. The firm believes that, by 2025, most of the enterprise applications are expected to be created using these platforms, which will reduce the requirement for traditional software development cycles and allow firms to innovate rapidly.
Sustainability continues to become a trend in software development. With companies actively optimizing their apps, green coding, optimal algorithms, and cloud optimization are being adopted as best practices, says Datafortune. Notably, the companies are also prioritizing sustainability in their software development services through the removal of redundant code and minimizing energy consumption in the data centers.
Overall, the broader software industry in 2025 will be characterized by innovations in AI, sustainability, security, and advanced and ground-breaking technologies like quantum computing.
Amidst such trends, we will now have a look at the 10 Hot Software Stocks with High Upside Potential.
A computer programmer working on a holographic digital twin technology software solution.
Our Methodology
To list the 10 Hot Software Stocks with High Upside Potential, we used a screener to find software stocks. We chose the stocks which have increased significantly over the past 6 months, and that analysts still see upside to. Finally, the stocks were arranged in ascending order of their average upside potential, as of February 14. We also mentioned the hedge fund sentiment around each stock, as of Q3 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Hot Software Stocks with High Upside Potential
10) PowerFleet, Inc. (NASDAQ:AIOT)
% Gain Over Past 6 Months: ~64.9%
Average Upside Potential: ~35.8%
Number of Hedge Fund Holders: 16
PowerFleet, Inc. (NASDAQ:AIOT) offers Internet-of-Things SaaS solutions in the United States, Israel, and internationally. Lake Street upped the company’s price target to $11 from $7, keeping a “Buy” rating. The firm was pleased with the healthy top-line momentum and progress witnessed in the cost synergies in fiscal Q3. Elsewhere, Roth MKM believes that following the Fleet Complete acquisition, new logos and upsell opportunities with Unity, warehouse, and AI cameras offer visibility for 10%-plus annual SaaS and more direct comparisons to Samsara Inc. (NYSE:IOT).
Since the comparisons to Samsara have been becoming more relevant, Roth MKM expects a strong upside to PowerFleet, Inc. (NASDAQ:AIOT)’s shares. The firm has a “Buy” rating with a price objective of $13. On the commercial front, the Fleet Complete acquisition has expanded the company’s market opportunity via scaled channel partnerships with leading telecommunications providers.
PowerFleet, Inc. (NASDAQ:AIOT)’s direct sales efforts are fueling high-value wins, which include a major Unity in-warehouse safety solution deal with one of the leading beverage companies in North America, with long-term total contract value revenue potential ranging between $25 million – $30 million. Furthermore, while announcing Q3 2025 financial results, PowerFleet, Inc. (NASDAQ:AIOT) highlighted that AI camera solutions are gaining strong traction, with sales volumes rising 52% YoY through its largest channel partner.
9) Rumble Inc. (NASDAQ:RUM)
% Gain Over Past 6 Months: ~79.7%
Average Upside Potential: ~43.2%
Number of Hedge Fund Holders: 6
Rumble Inc. (NASDAQ:RUM) operates video-sharing platforms in the US, Canada, and internationally. Maxim Group initiated coverage on its shares, providing a price target of $20 and a “Buy” rating. The analyst at the firm opines that as a result of strong user growth, Rumble Inc. (NASDAQ:RUM) has been a strong contender in the video space. Notably, the company saw average global monthly active users of 67 million in Q3 2024 as compared to 53 million in Q2 2024, representing the 11th consecutive quarter above 40 million average global MAUs on the platform.
In another positive development, Rumble Inc. (NASDAQ:RUM) announced that US President Donald Trump has established an official White House channel on the platform. It can significantly increase its visibility and user base. Rumble Inc. (NASDAQ:RUM) continues to expect revenue growth for the remainder of 2024. As the company ramps up monetization and maintains discipline around its cost structure, it expects to move materially towards adjusted EBITDA breakeven in 2025.
The increase in AI-driven recommendation algorithms can improve the company’s user experience. Furthermore, advances in machine learning and personalization enable platforms to match content with users, resulting in higher engagement and ad revenue. Overall, the growth of the software industry in AI, streaming technologies, and cloud will improve Rumble Inc. (NASDAQ:RUM)’s scalability, user engagement, and monetization, placing it well to capitalize on the opportunities provided by the software industry.
8) Bitdeer Technologies Group (NASDAQ:BTDR)
% Gain Over Past 6 Months: ~139.4%
Average Upside Potential: ~45.4%
Number of Hedge Fund Holders: 19
Bitdeer Technologies Group (NASDAQ:BTDR) operates as a technology company for blockchain and computing. The company manages mining pools, which need custom software for the distribution of mining rewards and coordination of computing power among participants. Rosenblatt analyst Kevin Cassidy upped the company’s price target to $30 from $22, keeping a “Buy” rating. As per the firm, Bitdeer Technologies Group (NASDAQ:BTDR) has a stable strategy for transitioning itself into the world’s largest vertically integrated Bitcoin miner. Furthermore, there remains a great potential for the company to diversify into AI.
Elsewhere, Benchmark analysts are also optimistic about the company’s growth prospects due to the expansion of a three-pronged platform, including Bitcoin mining, operation and construction of AI/HPC data centers, and development of ASIC Bitcoin mining rigs. Bitdeer Technologies Group (NASDAQ:BTDR)’s focus on constructing and operating AI/HPC data centers, together with the development of specialized ASIC Bitcoin mining rigs, exhibits the company’s integrated approach, which focuses on capitalizing on the dynamic digital currency landscape. The software industry’s advancements in AI-driven optimization, energy-efficient algorithms, and predictive maintenance can improve the efficiency of Bitcoin mining.
Through controlling the entire value chain, right from chip design to mining operations, Bitdeer Technologies Group (NASDAQ:BTDR) can optimize efficiency at each stage of the process. With continuous improvements in the software industry, the demand for HPC and blockchain infrastructure can increase, fueling growth for the company.
7) Porch Group, Inc. (NASDAQ:PRCH)
% Gain Over Past 6 Months: ~253.6%
Average Upside Potential: ~45.5%
Number of Hedge Fund Holders: 7
Porch Group, Inc. (NASDAQ:PRCH) operates a vertical software and insurance platform in the US. Craig-Hallum is confident in the company’s potential, which stems from its strategic changes, mainly the transformation of its insurance business into a reciprocal structure. On January 7, the company announced the completed formation of the Porch Insurance Reciprocal Exchange (PIRE) and the sale of Homeowners of America Insurance Company to PIRE.
With the transaction now complete, all the insurance policies, premiums, related claims, and all the HOA assets and liabilities will be owned by PIRE. Porch Group, Inc. (NASDAQ:PRCH) will receive commissions and fees for providing operating and other services to PIRE, which can deliver more predictable and higher-margin financial results for Porch Group, Inc. (NASDAQ:PRCH)’s shareholders. Craig-Hallum opines that the housing market is expected to recover its momentum into 2025, which can result in significant expansion for Porch Group, Inc. (NASDAQ:PRCH)’s software and data business.
Notably, with businesses digitizing their operations, the company’s software solutions for home inspectors, movers, and contractors are expected to witness higher adoption. Also, with the growth in the software industry, Porch Group, Inc. (NASDAQ:PRCH) will benefit through platform scaling, expansion of customer base, and improvement in operational efficiency.
6) Similarweb Ltd. (NYSE:SMWB)
% Gain Over Past 6 Months: ~32.6%
Average Upside Potential: ~48.7%
Number of Hedge Fund Holders: 19
Similarweb Ltd. (NYSE:SMWB) is engaged in providing cloud-based digital intelligence solutions in the United States, Europe, the Asia Pacific, the United Kingdom, Israel, and internationally. Citi upped the price target on the company’s stock to $22 from $14, keeping a “Buy” rating as part of a December quarter preview associated with the front-office application software group. Citi remains optimistic for front-office software budgets in 2025 in comparison to 2024 as sentiments have been improved among ecosystem partners post the US elections.
Similarweb Ltd. (NYSE:SMWB) released its financial results for Q4 ended December 31, 2024. The company’s focus on disciplined execution led to the first full year of non-GAAP operating profit and FCF, showcasing the company’s ability to accelerate growth while generating profit. Jefferies analyst Surinder Thind believes that demand from AI companies remains an incremental near-term tailwind. In 2024, customers started to train LLMs with Similarweb Ltd. (NYSE:SMWB)’s data, and the company is extensively engaging with brands focused on leveraging its unique data to understand the evolving digital world.
In a bid to capitalize on the opportunity, Similarweb Ltd. (NYSE:SMWB) decided to increase its investment in sales and R&D for 2025. For the year, the company expects to post a non-GAAP operating profit of between $1.0 million – $4.0 million.
5) DHI Group, Inc. (NYSE:DHX)
% Gain Over Past 6 Months: ~77.3%
Average Upside Potential: ~51.0%
Number of Hedge Fund Holders: 12
DHI Group, Inc. (NYSE:DHX) is a software and data solutions company, focusing on connecting job seekers with employers in specialized industries. To be precise, the company provides software products, online tools, and services that deliver career marketplaces to candidates and employers. Lake Street analyst Eric Martinuzzi upped the company’s price target to $3.50 from $3, keeping a “Buy” rating. As per the firm, DHI Group, Inc. (NYSE:DHX)’s recent action to clearly segment and separate the Dice and ClearanceJobs businesses can result in a potentially accretive asset monetization.
The company has announced a strategic reorganization, restructuring its operations into 2 distinct divisions. This reorganization focuses on providing dedicated leadership for each brand —Dice (Dice.com) and ClearanceJobs (ClearanceJobs.com). As per DHI Group, Inc. (NYSE:DHX)’s Chief, Dice and ClearanceJobs remain well-placed for success when each brand operates with a strong focus and a strategy tailored to their respective markets. The restructuring is anticipated to generate annual cost savings of ~$4.0 million – $6.0 million.
The reorganization is expected to enhance DHI Group, Inc. (NYSE:DHX)’s ability to offer specialized software solutions to its clients. Therefore, through refining its software offerings and organizational structure, the company remains well-placed to witness sustained growth in the recruitment industry.
4) NextNav Inc. (NASDAQ:NN)
% Gain Over Past 6 Months: ~78.6%
Average Upside Potential: ~57.2%
Number of Hedge Fund Holders: 17
NextNav Inc. (NASDAQ:NN) is engaged in providing next-generation positioning, navigation, and timing solutions in the US. In Q3 2024, the company remains focused on advancing its strategic vision and addressing the critical need for a terrestrial complement and backup to GPS. Furthermore, it continues to work with relevant government agencies to deliver a solution that will provide significant public benefit. During the 3 and 9 months ended September 30, 2024, NextNav Inc. (NASDAQ:NN)’s revenue was mainly aided by higher service revenue from technology and services contracts with government and commercial customers.
A recent Brattle Group report highlighted that the adoption of NextNav Inc. (NASDAQ:NN)’s proposal to reconfigure the Lower 900 MHz provides the broader US economy the equivalent of a $10.8 billion insurance policy to protect against GPS outages without taxpayer funding, plus additional benefits of $3.8 billion from increased resiliency. Collectively, this brings the total quantified value of having a backup to GPS to $14.6 billion.
Laughing Water Capital, an investment management company, released its Q4 2024 investor letter. Here is what the fund said:
“NextNav Inc. (NASDAQ:NN) – Nextnav, our next-gen GPS / wireless spectrum investment, was our largest contributor to 2024 returns, and remains our largest position. At this time we are in a holding pattern with Nextnav as we wait for updates from the Federal Communications Commission (FCC) on the Company’s petition to update the rules that govern the 900 MHz spectrum band in a way that will allow for the creation of a terrestrial GPS system in the U.S., as well as ~15 MHz of 5G spectrum.
There is some uncertainty surrounding this process, but commentary from incoming FCC Chair Brendan Carr and other Commissioners suggests the chances for approval are favorable as terrestrial GPS is a National Security priority, and refilling the spectrum pipeline is an FCC priority.
The stock has been under heavy pressure in recent weeks as two different private equity funds – one a 2005 vintage, and the other a 2012 vintage – appear to have reached the end of their fund lives and are thus aggressively selling shares. I suspect this overhang will clear with time…” (Click here to read the full text)
3) Palladyne AI Corp. (NASDAQ:PDYN)
% Gain Over Past 6 Months: ~513.1%
Average Upside Potential: ~60.9%
Number of Hedge Fund Holders: N/A
Palladyne AI Corp. (NASDAQ:PDYN) is a software company that is focused on delivering software enhancing the utility and functionality of third-party stationary and mobile robotic systems. Alliance Global Partners initiated the coverage of the company’s stock with a “Buy” rating and a price target of $15. The company’s AI software is utilized to train mobile and static robotic systems to adapt to different circumstances.
Alliance Global Partners believes Palladyne AI Corp. (NASDAQ:PDYN)’s contract to provide AI-based training for Red Cat’s drones has been providing validation, with a strong pipeline expected to result in further adoption across different industries. The company announced that it has been awarded a new contract from the Air Force Research Laboratory (AFRL) to migrate the Palladyne™ Pilot AI software platform to next-generation, U.S.-made AI computing chipsets. Palladyne AI Corp. (NASDAQ:PDYN) and Red Cat Holdings, Inc. announced the completion of the first successful flight in which multiple Teal drones equipped with Palladyne™ Pilot AI software autonomously collaborated to identify, prioritize, and track objects of interest on the ground.
Notably, the flight reflects how the Palladyne Pilot AI software uses sensor management and platform collaboration to allow a flight of 2 or more drones to autonomously collaborate and share multi-modal sensor information under constrained communication between the drones.
2) MicroStrategy Incorporated (NASDAQ:MSTR)
% Gain Over Past 6 Months: ~149.5%
Average Upside Potential: ~62.8%
Number of Hedge Fund Holders: 25
MicroStrategy Incorporated (NASDAQ:MSTR), doing business as Strategy, is the world’s first and largest Bitcoin treasury company. It adopted Bitcoin as its primary treasury reserve asset. The company’s business is providing and developing enterprise analytics software, which is focused on business intelligence tools and mobile apps. Analyst Dan Dolev from Mizuho Securities initiated coverage on shares of MicroStrategy Incorporated (NASDAQ:MSTR) with an “Outperform” rating and a price target of $515.
The analyst’s rating is backed by MicroStrategy Incorporated (NASDAQ:MSTR)’s potential to continue buying Bitcoin. The analyst expects the price of Bitcoin to rise over time, pushing the company’s value higher. Elsewhere, Mark Palmer, an analyst at Benchmark, believes that MicroStrategy Incorporated (NASDAQ:MSTR) is a top candidate to be added to the S&P 500 index when the next rebalancing occurs in June 2025. Notably, the stocks that are added to major indices like the S&P 500 get a boost as ETFs and MFs tracking the index need to buy their shares.
The company’s subscription-based cloud revenue can result in increasing the migration to cloud BI (business intelligence) platforms. Also, MicroStrategy Incorporated (NASDAQ:MSTR)’s focus on embedded analytics places it well to capture more enterprise customers. With firms increasing their software spending to improve decision-making, the company’s strong enterprise customer base can fuel software revenue growth. Greenlight Capital, an investment management firm, released its Q4 2024 investor letter. Here is what the fund said:
“There is an open debate as to whether Bitcoin will at some point enter the mainstream as an official currency. In fact, there is a bill before Congress for the U.S. to establish a “Strategic Bitcoin Reserve” and buy one million Bitcoins over five years. The bill’s purpose appears to be the use of public funds to ramp up the price of Bitcoin, thereby enhancing the wealth of existing Bitcoin holders. This seems a dubious use of taxpayer funds, but the new administration has a lot of Bitcoin-owning supporters, so it might happen. More likely, cooler heads will decide that the government should not borrow another trillion dollars in the bond market to speculate in Bitcoin and that there is, in fact, nothing strategic about doing so.
One of the biggest owners of Bitcoin is MicroStrategy Incorporated (NASDAQ:MSTR). While MSTR owns a small software business, its principal pursuit is buying Bitcoin. In practice, MSTR is an investment company that buys and holds Bitcoin.2 MSTR trades at a large premium to the value of the underlying Bitcoin it holds. The idea is to raise money from new investors at a premium and use the proceeds to buy more Bitcoin. Since the Bitcoin that MSTR buys costs less than the Bitcoin-implied value of MSTR’s stock, the new investment is dilutive to new investors but accretive to existing investors. MSTR’s promoters have labeled the return to existing investors created by this scheme the “Bitcoin yield”. As Bitcoin itself yields nothing, the Bitcoin yield is simply a measure of the Ponzi finance’s effectiveness. Lately, it has been pretty effective.”
1) SoundHound AI, Inc. (NASDAQ:SOUN)
% Gain Over Past 6 Months: ~121.5%
Average Upside Potential: ~118.8%
Number of Hedge Fund Holders: 11
SoundHound AI, Inc. (NASDAQ:SOUN) develops independent voice AI solutions, enabling businesses across automotive, TV, IoT, and customer service industries to deliver high-quality conversational experiences. The company opines that its in-vehicle voice commerce platform can resonate well with automakers. SoundHound AI, Inc. (NASDAQ:SOUN) introduced a new platform at the CES 2025 tech trade show. The company exhibited its on-the-go food ordering service to the customers.
SoundHound AI, Inc. (NASDAQ:SOUN)’s technology is being widely adopted by the broader automotive sector, with big brands including Hyundai integrating its vocal features into the vehicles. There has been rapid adoption by restaurants, powering ordering systems in more than 10,000 locations. SoundHound AI, Inc. (NASDAQ:SOUN)’s increased scale, together with strong market enthusiasm for conversational AI, is expected to aid its long-term growth prospects.
SoundHound AI, Inc. (NASDAQ:SOUN) has significantly increased industry diversification with well-balanced contributions throughout automotive, restaurants, financial services, healthcare, and insurance sectors, each accounting for 5%-25% of revenue in Q3 2024 as compared to more than 90% of automotive only in the prior year. SoundHound AI, Inc. (NASDAQ:SOUN) projects its FY 2024 revenue of between $82 million – $85 million and its FY 2025 revenue to be $155 million – $175 million.
While we acknowledge the potential of SOUN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than SOUN 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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