Software stocks have been spearheading the stock market’s rally over the past two years and there seems to be no slowing down for the broader software industry. Investors who’ve gotten in early into some of the top software stocks right now have realized multibagger returns, and there’s likely more money to be made as the rally continues.
Of course, I’d be lying if I said I knew which stocks would be the ones to deliver parabolic returns next. That said, you could still find them yourself if you look at the top-performing software stocks so far this year. Many of them are gaining significantly for the right reasons. Some of these top-performing software stocks have a long runway and can mature into much bigger companies down the line.
A medical professional demonstrating the use of a Software-Based Prescription Digital Therapeutics Platform for treating Type 2 Diabetes.
Methodology
For this article, I screened the top-performing software stocks year-to-date. Stocks that I have covered recently will be excluded from this list.
I will also mention the number of hedge fund investors in these stocks. Why are we interested in the stocks that hedge funds invest in? 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).
15. Innodata (NASDAQ:INOD)
Number of Hedge Fund Holders In Q3 2024: 10
Innodata (NASDAQ:INOD) is a data engineering company that specializes in AI.
The stock is up significantly so far this year as the AI rally continues and its financials have remained solid. In Q3 2024, it exceeded prior guidance and won three new big tech customers in the first nine months of 2024 on top of five “Magnificent 7” customers won in 2023.
Full-year 2024 revenue guidance raised to 88–92% year-over-year growth and analysts project 50% revenue growth in 2025, with free cash flow expected to possibly reach $50 million.
Analysts have high hopes for its Q4 2024 earnings report after the market closes on February 20, 2025.
The consensus price target of $38.2 implies 29.05% downside.
INOD stock is up 36.28% year-to-date.
14. Materialise NV (NASDAQ:MTLS)
Number of Hedge Fund Holders In Q3 2024: 6
Materialise NV (NASDAQ:MTLS) is a 3D printing company.
The stock is up significantly year-to-date as investors are pricing in expectations of strong earnings results on February 20, 2025.
It has also had 9.1% revenue growth in manufacturing services and 24.5% growth in the medical segment in Q3 2024.
Analysts expect Q4 2024 earnings of $0.05 per share and revenue of $71.66 million.
The consensus price target of $9.5 implies 1.25% downside.
MTLS stock is up 36.65% year-to-date.
13. Arbe Robotics Ltd (NASDAQ:ARBE)
Number of Hedge Fund Holders In Q3 2024: 3
Arbe Robotics Ltd (NASDAQ:ARBE) is a semiconductor company that specializes in 4D imaging radar technology for autonomous vehicles.
The stock is up significantly so far this year after news of a collaboration with NVIDIA to integrate Arbe’s radar technology into next-generation autonomous vehicle platforms. Moreover, Analysts at Roth MKM upgraded ARBE’s price target to $5 (from $4).
In January, Arbe also secured $29 million through an underwritten registered direct offering at $3.2 per share. It has secured major automotive contracts and has expanded into China. Management projects $7.3 million in 2025 revenue.
The consensus price target of $3 implies 11.11% upside.
ARBE stock is up 45.16% year-to-date.
12. Gorilla Technology Group (NASDAQ:GRRR)
Number of Hedge Fund Holders In Q3 2024: 3
Gorilla Technology Group (NASDAQ:GRRR) is a security convergence and network defense company.
The stock is up significantly so far in 2025 as Gorilla formally closed its ATM program to eliminate concerns about stock dilution and protect shareholder value. This was followed by a prior share buyback initiative.
In addition, Gorilla raised $15.7 million through the exercise of 2.66 million warrants in January and reported a 189% year-over-year revenue increase to $64.7 million.
The consensus price target of $18 implies 32.25% downside.
GRRR stock is up 47.12% year-to-date.
11. FiscalNote Holdings Inc (NYSE:NOTE)
Number of Hedge Fund Holders In Q3 2024: 13
FiscalNote Holdings Inc (NYSE:NOTE) is a SaaS company that specializes in market intelligence.
The stock is up significantly after it regained compliance with NYSE listing standards on February 4, 2025.
Also, it introduced PolicyNote for policy management. Early adopters like Encore Renewable Energy reported notable efficiency gains and this boosted confidence that FiscalNote could retain and expand its existing customer base even more.
The consensus price target of $2.83 implies 69.67% upside.
NOTE stock is up 56.07% year-to-date.
10. AppLovin Corp (NASDAQ:APP)
Number of Hedge Fund Holders In Q3 2024: 51
AppLovin Corp (NASDAQ:APP) is a mobile technology company.
The stock is up significantly after its Q4 2024 earnings beat and an AI advertising breakthrough. It reported 44% year-over-year revenue growth to $1.37 billion, along with 73% advertising revenue growth to $999.4 million. This was driven by its AXON 2.0 AI engine and its AI-optimized ad placements that extend beyond mobile gaming to other industries.
The AXON tech accounts for two-thirds of its revenue now. With AI models getting better and improving ad targeting efficiency by 40% year-over-year, analysts are quite bullish.
Furthermore, Q1 2025 revenue forecasts of $1.36–1.39 billion (+30% year-over-year at midpoint) exceeded consensus estimates of $1.32 billion.
The consensus price target of $422.18 implies 17.24% downside.
APP stock is up 57.53% year-to-date.
9. GDS Holdings Ltd (NASDAQ:GDS)
Number of Hedge Fund Holders In Q3 2024: 32
GDS Holdings Ltd (NASDAQ:GDS) is a high-performance data center company in China.
The stock is up significantly as the broader Chinese tech industry has been recovering fast. Third-quarter 2024 results showed 18% year-over-year revenue growth and 15% year-over-year adjusted EBITDA growth. Plus, utilization rates for operational data centers rose to 73.6%.
Wall Street is also bullish about its Q4 2024 earnings report scheduled for March 25, 2025. If it keeps beating earnings estimates, the stock could be lifted even higher from here.
The consensus price target of $22.6 implies 42.26% downside.
GDS stock is up 64.73% year-to-date.
8. Pagaya Technologies Ltd (NASDAQ:PGY)
Number of Hedge Fund Holders In Q3 2024: 21
Pagaya Technologies Ltd (NASDAQ:PGY) is a tech company that uses AI and machine learning for financial institutions.
The stock is up significantly after its strong 2025 guidance and a Q4 2024 earnings beat. It reported Q4 2024 revenue of $279.39 million (beating estimates of $264.28 million) and sees good 2025 adjusted EBITDA.
It had some major asset-backed securitization (ABS) deals. It closed a $300 million auto loan ABS on February 10, 2025. This transaction was oversubscribed by 14 investors and marked Pagaya’s largest auto deal since 2023.
Also, a $500 million loan was upsized to $600 million due to high demand, along with a $2.4 billion forward flow agreement with Blue Owl Capital in early February.
The consensus price target of $20.17 implies 31.21% upside.
PGY stock is up 65.45% year-to-date.
7. Tuya Inc (NYSE:TUYA)
Number of Hedge Fund Holders In Q3 2024: 14
Tuya Inc (NYSE:TUYA) is a cloud IoT platform for smart devices.
The stock is up significantly as it integrated DeepSeek’s LLM capabilities into its cloud developer platform. In Q3 it posted 33.6% sales growth to $81.6 million. Analysts are optimistic about its Q4 2024 results scheduled for February 26, 2025.
Moreover, it integrated Google’s Device and Structure APIs into its platform.
TUYA stock is up 66.48% year-to-date.
6. Cerence Inc (NASDAQ:CRNC)
Number of Hedge Fund Holders In Q3 2024: 10
Cerence Inc (NASDAQ:CRNC) makes AI-powered virtual assistants and conversational AI products for automakers.
The stock is up significantly after it reported a revenue of $50.9 million, which was down 63% year-over-year but exceeded the high end of its guidance. Free cash flow was positive at $7.9 million.
Cerence reduced operating expenses by $29 million year-over-year through layoffs and office consolidations. In turn, gross margins improved to 65%.
Cerence also secured six new design wins for core products and two generative AI contracts with major automakers and launched CaLLM Edge, the first large language model (LLM) for offline automotive use. It maintains full-year guidance of $236–247 million in revenue and projected $20 million of fixed contracts.
The consensus price target of $8.66 implies 36.95% downside.
CRNC stock is up 75.03% year-to-date.
5. Xunlei Ltd (NASDAQ:XNET)
Number of Hedge Fund Holders In Q3 2024: 3
Xunlei Ltd (NASDAQ:XNET) is a tech company that provides distributed cloud services.
The stock is up significantly as it announced a RMB500 million ($70 million) acquisition of Shanghai Kuanghui Internet Technology (Hupu). This is China’s premier sports media platform and the move will integrate Hupu’s 150 million active users with Xunlei’s cloud infrastructure.
Plus, Xunlei reported 99% year-over-year revenue growth TTM. They estimate Q4 2024 revenues to be between US$77 million and US$82 million.
XNET stock is up 78.39% year-to-date.
4. Alpha Technology Group Ltd (NASDAQ:ATGL)
Number of Hedge Fund Holders In Q3 2024: N/A
Alpha Technology Group Ltd (NASDAQ:ATGL) is a cloud IT solutions company that specializes in AI.
The stock is up significantly due to AI hype and the company marketing itself as Hong Kong’s first AI company listed on the Nasdaq. The market has also been generally more bullish towards Chinese AI stocks post-DeepSeek.
Revenue grew to $1.59 million TTM, though the company remains unprofitable with a -$705,140 net income. Insiders own 76% of shares.
ATGL stock is up 87.91% year-to-date.
3. BigBear.ai Holdings Inc (NYSE:BBAI)
Number of Hedge Fund Holders In Q3 2024: 7
BigBear.ai Holdings Inc (NYSE:BBAI) is an AI company.
The stock is up significantly as it won a major U.S. Department of Defense contract. The contract will advance its Virtual Anticipation Network (VANE) prototype for the DoD’s Chief Digital and Artificial Intelligence Office (CDAO). The project aims to improve geopolitical risk analysis using custom AI models to assess adversarial media.
It has won several other contracts over the past few quarters and Q3 2024 revenue grew 22% year-over-year to $41.5 million. Adjusted EBITDA is positive at $0.9 million, and full-year 2024 guidance sits at $165 to $180 million.
The consensus price target of $5.25 implies 41.79% downside.
BBAI stock is up 102.7% year-to-date.
2. Wellchange Holdings Co Ltd (NASDAQ:WCT)
Number of Hedge Fund Holders In Q3 2024: N/A
Wellchange Holdings Co Ltd (NASDAQ:WCT) is a Hong Kong-based cloud SaaS company.
The stock is up significantly as it completed a $10 million public offering on January 17, 2025, and is now among the Hong Kong-based software companies investors can bet on.
The broader Chinese market has been climbing in recent months, and AI stocks linked to China have been especially hyped up due to DeepSeek. Wellchange has a niche in enterprise digital solutions and can partner up with some major corporations.
WCT stock is up 127.06% year-to-date.
1. Digital Turbine Inc (NASDAQ:APPS)
Number of Hedge Fund Holders In Q3 2024: 19
Digital Turbine Inc (NASDAQ:APPS) provides an end-to-end mobile growth platform for its clients.
The stock is up significantly after strong fiscal Q3 2025 results and its guidance being raised. The company posted 13% sequential revenue growth to $134.6 million and 44% sequential growth in non-GAAP adjusted EBITDA to $22 million.
Cash flow improved to $6.4 million and Digital Turbine raised its full-year guidance to $485–$490 million in revenue (up from prior estimates) and $69–$71 million in non-GAAP adjusted EBITDA.
The consensus price target of $2.38 implies 61.63% downside.
APPS stock is up 266.27% year-to-date.
While we acknowledge the potential of APPS as an investment, our conviction lies in the belief that some 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 APPS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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