Industry Overview - The S&P North American Technology Software Index has underperformed the S&P 500 by 19 percentage points over the past year, marking the worst relative performance for the software industry since the bear market of 2022 [1] - Concerns about artificial intelligence (AI) disrupting traditional business models have contributed to this underperformance, with investors worried about reduced demand for many software products [2] AppLovin - AppLovin is projected to have a 45% upside based on the median target price of $774.50 per share, compared to its current price of $533 [8] - The company specializes in ad tech software that enhances consumer engagement and monetizes web content through targeted campaigns, having expanded from mobile gaming to e-commerce advertising [5] - AppLovin differentiates itself by earning revenue based on ad performance rather than a percentage of ad spend, and its AI-powered recommendation engine, Axon, significantly outperforms competitors [6] - Axon reportedly drives a 45% higher return on ad spending compared to Meta Platforms and 115% higher than platforms like TikTok and YouTube [7] - Wall Street estimates that AppLovin's adjusted earnings will grow at an annual rate of 58% through 2027, making its current valuation of 66 times earnings appear reasonable [8] Atlassian - Atlassian has an implied upside of 84% based on a median target price of $225 per share, compared to its current price of $122 [13] - The company develops work management and collaboration software for both technical and non-technical teams, recognized as a technology leader in various categories by Gartner [9] - Atlassian invests heavily in R&D and is unique in connecting technical, non-technical, and IT service teams on a single platform, which enhances collaboration and upselling opportunities [10] - The introduction of generative AI features called Rovo aims to improve productivity and efficiency across business teams, positioning Atlassian as a potential winner in the AI boom [11] - Wall Street anticipates Atlassian's adjusted earnings to increase at 22% annually through the fiscal year ending in June 2027, with a current valuation of 31 times earnings appearing reasonable [12]

Core Idea - Certain Wall Street analysts view CoreWeave and Atlassian as significantly undervalued stocks in the context of the growing artificial intelligence (AI) sector, which is projected to see substantial growth in spending and economic impact [1][2]. CoreWeave - CoreWeave is recognized as a leader in the AI cloud services sector, specifically designed to support AI workloads, and has been ranked above major competitors like Amazon and Microsoft by SemiAnalysis [4][5]. - The stock has experienced a decline of 53% from its peak due to concerns over the sustainability of the AI boom and the company's substantial debt incurred for data center construction [5]. - Wall Street estimates indicate that CoreWeave's revenue is expected to grow at an annual rate of 94% through 2027, making its current valuation of 8.4 times sales appear attractive if profitability is achieved [6]. - Analysts have set a target price of $180 per share for CoreWeave, suggesting a potential upside of 105% from its current price of $88 [8]. Atlassian - Atlassian specializes in work management and collaboration software for both technical and non-technical teams, and has been recognized as a leader in DevOps and collaborative work management software by Gartner [9][10]. - The company has adopted a unique sales strategy that emphasizes self-service and word-of-mouth, allowing for greater investment in research and development compared to competitors [10]. - Atlassian's stock has fallen 57% from its high, driven by concerns that demand for DevOps tools may decline as AI coding tools gain popularity; however, analysts argue that AI will actually increase the demand for DevOps software due to productivity improvements [12]. - Wall Street forecasts adjusted earnings for Atlassian to grow at 22% annually through June 2027, making its current valuation of 35 times earnings reasonable, with a median target price of $230 per share implying a 65% upside from the current price of $139 [13].