Wall Street believes software stocks could be the big winner from the DeepSeek revelation

Published Wed, Jan 29 202510:01 AM ESTUpdated Wed, Jan 29 202511:45 AM EST

Software companies may emerge as beneficiaries of Monday's global tech shake-up following the DeepSeek revelation, Wall Street analysts say. Several software stocks were able to avoid the big declines seen elsewhere in tech on Monday as Chinese startup DeepSeek raised alarm over U.S. spending and leadership within artificial intelligence. In the wake of these realizations, investors have scrambled to piece together how each segment of stocks will fare. But it seems like there is no need to fret about at least some software names. Analysts at BMO Capital Markets and Canaccord Genuity said in separate notes to clients that the DeepSeek news may end up being positive for this group. Canaccord Genuity's Kingsley Crane went so far as to call Monday a "watershed moment" for software. "Until now, AI has been defined more by largesse than finesse," Crane wrote to clients. "The fact that a viable strategic alternative to building the largest cluster physically possible has emerged is, in our view, profoundly bullish for software." In short, Crane said greater diversity and competition within the model space is a "recipe" for lower costs and improved technology. That should, he said, help accelerate momentum for software creation. Given this backdrop, BMO analyst Keith Bachman said the DeepSeek developments should be a "likely positive" for software names Salesforce , ServiceNow and HubSpot . HubSpot has led this group higher this week, surging more than 6% since Monday. The stock is now up about 12% in 2025, building on last year's 20% gain. HUBS YTD mountain HubSpot in January But Wall Street sees a pullback ahead, with the average price target of analysts polled by LSEG implying shares can slide 3%. Still, the majority of analysts have buy ratings. Salesforce followed with a pop of nearly 6% so far this week. That has brought its year-to-date advance to above 5%, which adds to 2024's rally of just over 27%. Most analysts surveyed by LSEG also have a buy rating on the stock. But unlike HubSpot, they see more upside ahead, with an average price target suggesting shares can rise more than 12%. ServiceNow has added around 3% this week, bringing its 2025 increase to almost 9%. That extends 2024's surge of slightly more than 50%. While the majority of analysts hold buy ratings, they foresee a minor retreat ahead, according to LSEG. The average price target of surveyed analysts shows shares can slip around 2%. Analysts are not arguing that every software name is expected to benefit in the same way. In fact, Bachman called the effect to hyperscalers such as Microsoft and Oracle "less clear."