Citi is sharing its top software names to play the booming artificial intelligence market, including two companies it views as “unfairly categorized” as losers. Software stocks barreled back from the grave in the first half of 2023 as investors rotated back into the technology trade on the heels of the roughest year for the tech-heavy Nasdaq Composite since 2008 . Although many hypergrowth names look at risk as growth-adjusted valuation near Covid-19 levels, and may lack significant upside to estimates, analyst Tyler Radke said the overall sector looks attractively valued, naming MongoDB his top play for the second half. “MDB remains our top pick even with the stock up ~100% YTD as we see significant upside to estimates, GenAI as a potential [total addressable market] accelerator against one of the largest markets in software,” he wrote in a Wednesday note to clients. As of Thursday’s close, shares have rallied nearly 107% this year, with the Wall Street firm’s $430 price target reflecting about 6% upside. AI concerns look ‘overdone’ Along with MongoDB, Radke believes the market is underestimating contact center software company Nice Ltd and data analytics provider Alteryx , and called the categorization of these names as so-called AI losers “overdone.” Alteryx shares are down more than 16% this year, while Nice has gained nearly 9%. “We see opportunity for stocks to recover following strong Analyst Days/product launches and 2H company specific tailwinds,” he said. Many investors in recent weeks have cited concerns that generative AI could hurt Israel-based company’s seat-based model. But Radke said the recent analyst day displayed a “confident message” that Nice is well situated to capitalize on GenAI, and transition from seat-based to usage-based pricing. Radke also said that strong momentum from expanded software and a growing product portfolio should offset fears that AI may hinder Alteryx. Recent analyst day announcements also highlighted ways the company is using AI and machine learning within its data analytics cloud platform, he added. AYX YTD mountain Alteryx shares in 2023 “Furthermore, the updated financial targets highlighted a durable 20%+top-line growth profile with a consistent margin expansion could potentially drive a reversal in sentiment and drive outperformance,” Radke said. The firm’s $70 price target on shares suggests more than 65% upside from Thursday’s close, — CNBC’s Michael Bloom contributed reporting
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