It’s been a rough week for financial markets, with the Dow Jones Industrial Average and the S&P 500 mostly trending downward.
Granted, the market is facing quite a bit of uncertainty right now as the threat of President Donald Trump’s tariffs continues to loom over the global economy. But as TheStreet’s Silin Chen reports, in the two-year period that preceded the tariffs of 2018, the latter surged almost 50%.
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Many experts aren’t overly concerned about the long-term impact of these policies, which are pushing stocks down in the short term. While the recent Q4 2024 earnings season prompted some analysts to revise their views on leading tech stocks, others issued more bullish stances.
One analyst who knows the tech sector well is particularly optimistic about a few companies in the space. He sees them as the best AI software stocks to buy in 2025.
Palantir Technologies has been a favorite AI stock among Wall Street analysts lately, especially after its recent Q4 earnings smash.
These two tech stocks could be the AI breakout plays for 2025
One key takeaway from the Q4 earnings is that most members of Magnificent 7, a group of tech stocks responsible for most of the sector’s growth, plan on increasing their AI investments in 2025, as indicated by their higher capital expenditure figures.
The industry’s leading companies are as focused as ever on continuing to build and scale their AI endeavors. However, as one analyst sees it, one of the best investment strategies for 2025 may be to focus on AI software stocks.
Related: Palantir’s stock price may surge for surprising reason
Dan Ives of Wedbush Securities, a 5-star sell-side analyst, is known for his bullish takes on tech stocks. In a recent note to investors, he and his team laid out their take on the industry, explicitly stating that they believe the U.S. market has arrived at its AI software era and that the two best stocks to buy for exposure are Palantir (PLTR) and Salesforce (CRM) .
In December 2024, Ives flagged PLTR stock as a likely 2025 winner. Wall Street has continuously underestimated it, but Palantir stands to benefit significantly from an increase in enterprise AI spending.
He maintains a bullish price target of $120 on Palantir, which recently reported extremely strong earnings. The multi-faceted tech company reported 45% growth in government revenue and 64% growth in U.S. commercial revenue, coming in above estimates on both earnings-per-share and revenue.
In the weeks leading up to the Palantir earnings report, Ives praised both Palantir’s technology and its CEO, Alex Karp, flagging it as a likely candidate to pull ahead of its competitors in the AI race.
Palantir and Karp are playing chess in AI while others play checkers @bsurveillance 🔥🏆🍿🐂♟️ https://t.co/VCDQJKvJpf
— Dan Ives (@DivesTech) February 4, 2025
“Palantir has been a major focus during the AI Revolution with expanding use cases for its marquee products leading to a larger partner ecosystem with rapidly rising demand across the landscape for enterprise-scale and enterprise-ready generative AI,” Ives states, praising its Artificial Intelligence Platform (AIP).
Ives isn’t alone in his positive take on Karp. Veteran trader James “Rev Shark” DePorre recently wrote that Palantir and Cloudflare (NET) should be considered the best examples of AI leadership, though he acknowledged that both stocks are highly priced.
While AI-driven momentum has helped push PLTR stock up more than 360% over just the past year, the company isn’t always ranked among AI stocks with the highest growth potential. But Ives isn’t the only one who sees its API as a significant growth driver this year.
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2025 is considered a year of adaptation for agentic AI, the type of artificial intelligence that can make decisions and take direct action independently. This phase of technology is predicted to bring a new generation of AI agents, and Palantir could be among the companies leading the charge.
“Its focus on developing operational AI agents beyond traditional large language models sets Palantir apart,” reports Barchart. “Unlike conventional LLMs, Palantir aims to create autonomous systems capable of enhancing human decision-making at scale.”
Other stocks to buy to win the AI software race
The analysis from Ives’ team also discussed the impact of AI infrastructure spending, noting that leading chipmaker Nvidia (NVDA) is far from the only company that stands to benefit from the shifting market dynamics.
Related: 5 quantum computing stocks investors are targeting in 2025
On the contrary, it highlights the multiplier effect, estimating that “we estimate that for every $1 spent on Nvidia, there is an $8-$10 multiplier across the rest of the tech ecosystem,” which the Wedbush analysts see as benefitting companies in the AI software space.
While the note doesn’t include much direct context on Salesforce, it does name it as Ives’ other top AI software stock. However, the analyst also adds that he sees several other tech vendors as being well-positioned to capitalize on these trends, including IBM, Snowflake SNOW, and Innodata (INOD) .
Overall, the Ives team, which correctly predicted Palantir’s recent growth, clearly believes that enterprise AI spending will continue to transform the industry in 2025. It has identified Palantir and Salesforce as the top AI stocks to buy before this happens.
Related: Veteran fund manager issues dire S&P 500 warning for 2025
