In the rapidly evolving landscape of technology, the artificial intelligence (AI) software market is anticipated to experience significant growth in 2025, driven by several key trends and the strategic positioning of various tech companies. Despite a notable growth in the U.S. software market by 59% in 2023 and 23% in 2024, Bank of America (BAC) notes that development projections are still below historical averages, suggesting a potential for further expansion. The bank highlights three main secular themes for the year: the rise of Agentic AI, an increase in enterprise IT budgets, and a continuing shift towards cloud migration. These trends are expected to propel the AI software sector forward, offering ripe opportunities for investment and growth.
Macquarie, another investment firm, shares a generally optimistic outlook for software stocks in 2025, though it cautions that this growth might come with periods of volatility. The firm underscores positive sentiment driven by improved revenue trends and the burgeoning interest in agentic AI — systems designed to act autonomously to achieve specific goals. Among the companies Macquarie sees as beneficiaries, GitLab Inc. (GTLB) stands out, having been named the top stock pick for 2025. Despite a modest 4.4% gain in stock value in 2024, Macquarie’s confidence in GitLab stems from its advanced position in the AI software race, particularly through its AI-driven product, GitLab Duo, aimed at accelerating code delivery. Macquarie has given GitLab an ‘Outperform’ rating with a price target of $90, reflecting strong expectations for its performance.
Echoing this sentiment, Bank of America has also spotlighted GitLab as its top small to mid-cap pick for the year, attributing this choice to GitLab’s growing market share in DevSecOps (which is basically the integration of security practices into every phase of the software development lifecycle), especially as AI monetization scales up. The firm also maintains a ‘Buy’ rating on GitLab with the same $90 price target, indicating a shared belief in its potential for significant appreciation.
GitLab, based in San Francisco and backed by Google, operates an open-source repository development platform that facilitates coding and software development. Its recent market performance, with a market cap of $10.23 billion, shows a quarterly gain of nearly 14%, though it remains down 7.83% year over year. With a 52-week range from $40.72 to $78.53, and closing at $63.02 on the last trading day before a slight after-hours dip to $63, GitLab’s trajectory seems poised for recovery and growth, particularly as the interest in AI continues to surge.
This optimism isn’t confined to GitLab alone. Macquarie also rates Autodesk (ADSK) and Datadog (DDOG) with ‘Outperform’ ratings, suggesting that the AI software trend is broad-based with multiple players likely to benefit. However, not all software companies are seen with the same bullish outlook; Salesforce (CRM), MongoDB (MDB), and Atlassian (TEAM) receive ‘Neutral’ ratings from Macquarie, indicating a more balanced view on their growth prospects relative to the AI boom.
The convergence of increased enterprise IT budgets, the migration to cloud services, and the evolution of AI, particularly in agentic forms, sets the stage for a dynamic 2025 in the AI software sector. Companies like GitLab, with strategic investments in AI technology, are well-positioned to lead this charge, potentially reshaping the software industry’s landscape. As the year unfolds, the focus will be on how these companies leverage AI to not only enhance their product offerings but also to navigate through anticipated market volatility to fulfill the high expectations set by analysts.
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