Bank of America told investors that the software sector’s 25% year-to-date decline has created selective opportunities among equities that it expects to lead any recovery. The firm’s analyst Koji Ikeda argued that while “no company [was] spared…software sector down 25% YTD,” four names stand out as likely to outperform when investor sentiment stabilizes.
BofA placed Snowflake at the top of its list, describing the company as “attractively positioned to be a long-term share gainer in the AI data cloud opportunity.” Ikeda emphasized Snowflake’s role in addressing an important market need, saying it continues to solve a “critical problem: making sense of mountains of data.” The bank also noted that any volatility tied to initial fiscal 2027 revenue guidance should be viewed as a buying opportunity.
MongoDB was also reiterated as a constructive holding. BofA pointed to accelerating growth of Atlas and to durable demand for MongoDB’s JSON document database. The bank characterized MongoDB’s technology as “special…and it’s setting the business up nicely as a long-term share gainer of new AI workloads.” Although the analyst acknowledged that expectations into the next earnings report remain elevated, he suggested that short-term weakness should be seen in a constructive light.
Datadog received a defense against concerns about increased competition and decelerating growth. BofA argued that “observability is mission critical,” and highlighted the tool’s broad adoption among AI-native firms. The bank said that continued traction outside of AI-native customers could provide an additional catalyst for the business.
Rounding out BofA’s quartet, JFrog was cited for direct exposure to increasing AI-driven code volume. The bank summarized the dynamic succinctly: “more AI = more binaries = more JFrog.” BofA asserted that recent price weakness in the stock is overdone and that ongoing demand for binary management and security should remain robust as AI increases code generation and operational risk.
What BofA is saying
- Snowflake - positioned to capture long-term share gains in the AI data cloud market and solving large-scale data challenges.
- MongoDB - benefiting from accelerating Atlas growth and demand for its JSON document database, positioning it for AI workload adoption.
- Datadog - viewed as essential for observability, with adoption among AI-native firms and additional upside from non-AI native customers.
- JFrog - expected to benefit from higher code volume and security needs as AI increases binary creation and operational risk.
BofA’s note frames the sector-wide drawdown as opening a selective entry point rather than broad-based bargain hunting. The bank’s commentary focuses on structural demand related to AI, cloud data management, observability, and binary security as the reasons these four names may recover ahead of peers.