3 Software Stocks To Love in the Agentic AI Era!!

Welcome back to the channel, everyone. If the first phase of the AI boom was all about hardware infrastructure, massive cap backs, and even standard consumer chatbots. And you know, to be clear, we're still very much in that phase. But, we are moving away from AI being seen as simple software where a human types in a prompt and gets a static answer. Really, the next leg of growth is going to belong to the autonomous agents that function as specialized digital assistants. Maybe they're working alongside teams to execute complex business workflows, write code, manage enterprise databases, and handle complex operational problems for companies around the world. You know, when we look at first-generation AI, a lot of that was purely, you know, generative. It took text in, it spit text out. But, agentic AI is action-oriented. It utilizes loop-based reasoning, like the reason-and-act framework. So, an agent doesn't just write an email, it logs into the CRM, it checks a client's history, it creates an invoice and sends it, maybe even follows up if a payment is late. So, the secret sauce of an AI agent ability to use what are known as APIs, or application programming interfaces. So, you think of traditional AI as sort of a brilliant strategist with its hands tied behind his back. But, an AI agent has hands. It can open a database, run code, use a calculator, browse the web. But, I think here's the thing that maybe a lot of people are missing about the AI agentic era, which we are just entering into. An autonomous agent is only as good as the environment it operates in. And to actually do a job, an AI agent needs three things. It It needs to know your company's internal workflows, it needs a very efficient environment to build the underlying hardware, and it needs a secure, fast access to corporate data. And without those three things, an AI agent is essentially just a chatbot trapped in a vacuum. And that's why we think that some of the biggest winners of this AI revolution aren't just going to be the consumer AI startups that are making all the headlines right now. We think the real winners are going to be the entrenched enterprise giants who already own the workflows, the databases, and the hardware blueprints. So, today, Jose and I are going to be looking at three tech giants that we think are quietly weaponizing autonomous agents and are locking in billions in new software revenue in the process. >> Now, before we continue with today's episode, if you want market-beating stock picks from our analysts, make sure to check out the pinned comment and the description. Using that link gets you a promotional offer as our thanks for being a viewer. Thank you, and let's get back to today's episode. >> Thank you for that introduction, Rachel. And I mean, I I I love this episode. I I because I feel like the market hates software. Even though we've kind of seen a little bit of a pickup in software stocks, a lot of them have continued to get beaten down compared to 52-week highs and all-time highs. Now, the market is so fearful that AI is just going to be a revenue reduction, a margin hitter for the software space, is going to reduce the amount of licenses we need for software companies. And the first company, the first stock we're going to look at, I think eliminates a lot of those bearish thesis. So, we're going to take a close look at Synopsys, ticker SNPS. So, first, the CEO has talked about agent engineers as now an official company language. Where most people still believe AI is in this era of just a co-pilot, a chatbot, the CEO of Synopsys is saying that right now they are shifting to an autonomous set of engineers or agent engineers, and that is happening right now. Work workflows are moving from human-only to human plus agents. And they are already running Synopsys tools. Fools, I don't know how much you are on the X platform like I am. Maybe I'm just there too much, but there's actually been some viral tweets here and there where a a team, a small team, is working on chip designs. And they're building some great chips. Now, I'm not going to say that's a bearish case for Nvidia. Obviously, there's so much data there, but it's showing that even a small team plus a lot of AI agents can design something. Can design something. And that overall showcases the power of AI agents. Synopsys in their recent earnings, which was a little bit over 3 months ago, did give us some real numbers to cite. 20 customers are now evaluating agentic EDA solutions across more than 25 specialized AI agents spanning from front-end verification, from implementation, from analog flows. And this is active evals right now, not slideshows. And again, it's showcasing that agents are already moving. Now, the best part The best part is the monetization, right? Software wins. Management is exploring moving from subscription licenses for human engineers to subscription plus consumption pricing for AI agents using the tools. So, it's not like just because I have one engineer and AI agents doing more, I'm going to be paying less. No, you're most likely going to be paying more because those AI agents are going to be touching all those tools. And in theory, they should also have their own license or some form of pricing to be able to do this. The great thing is agents don't sleep. So, if you do have kind of a consumption-based platform, that TAM gets extremely bigger than just a seat-based solution. Now, the final bearish points is why agents equals more software, not less, is in both human and agentic workflows, you need more of our products to handle complexity. This is the counter to AI kill software fear case. In EDA, agents are customers to the software, not replacements for it. And the CEO has flagged a massive increase in demand for licenses to train and interest these agents. So, AI agents are not ending software. AI agents are not going to be using tools for free. They are going to be using those softwares more. If they're in a consumption-based platform or or or business model, you're going to be paying a good fee. They're already providing some form of ROI to companies, and companies like Synopsys are collecting a lot of data to make these tools even better and better, protecting their kind of moat, and protecting that users are not going to go to another platform instead, because why would it? Synopsys already does it all for you. Uh so that's my first one, Rachel. I would love to hear some of your thoughts here. >> Yeah, I think the thing that I find so fascinating about Synopsys is that AI-driven platform Synopsys AI where they're deploying these AI agents directly into the chip design process, for example. So instead of humans spending weeks experimenting with, you know, chip layouts, these agents use reinforcement learning essentially to test autonomously millions of different configurations in a matter of hours. So they can optimize chip layouts for, you know, peak performance. They can find maybe a hidden security vulnerabilities, right, in that hardware architecture. And they can also test how a chip would behave before it's ever, you know, entering one of these multi-billion-dollar fabrication plants. And essentially, it's shifting the act of chip design from a more constrained art form, if you will, into a much more automated software workflow. And by utilizing AI agents to design the actual chips that are running AI software, they're also accelerating the hardware development cycle. So they're actually compressing design timelines. I've seen numbers that say by up to 90% giants who are obviously in this frantic race to build custom silicon. So it's really interesting, you know, we're in a world where every hyperscaler wants their own proprietary AI chip, and Synopsys is essentially providing this autonomous digital workforce that is helping to design the future of computing. So it's it's a fascinating business looking at it from that perspective. >> All right, Rachel. For this one, I'm going to take it easy at only doing one stock. I'm going to give you the other two stock picks, and I'm pretty happy cuz these are two that I see extremely that the market sometimes punishes, and maybe we're going to see some of the bullish cases of why the market could be wrong. So, Rachel, what is here for for for stock number two? >> Yeah, so my pick uh the my first pick for stocks that we think can benefit from the agentic era is ServiceNow. And that's because this is a company that essentially owns the digital workflow for the vast majority of Fortune 500 companies. So, whether it's IT support, human resources onboarding, even customer service tickets, ServiceNow's platform connects a company's, you know, front and back office systems. And by embedding autonomous AI agents directly into these workflows, ServiceNow is essentially trans from what was once a more uh simple system of record to a system of automated actions. So, ServiceNow's digital agents act as tier one assistants. They handle repetitive work like resolving employee IT login crises, uh you know, updating database access requests. All of this, of course, frees human IT teams to focus on really complex and structure security. You you look at ServiceNow's uh recent earnings for Q2 of 2026, their subscription revenue grew about 25% year-over-year. Their Now Assist AI product actually just crossed $1 billion in annual contract value. And management has raised their 2026 AI revenue target to $1.5 billion because their enterprise customers are essentially scaling up contract commitments by an average of three times upon renewal. So, that's really interesting. I mean, this is essentially solving the core enterprise software growth problem. Instead of trying to upsell companies on more employee software seats, ServiceNow has restructured its licensing model. This is something we're seeing for a lot of these software-oriented businesses that have had, you know, their their meltdown earlier this year, the SaaS apocalypse, right? So, ServiceNow has introduced these AI native tiers like advanced and prime. And essentially what they're doing is they're shifting their monetization from flat seat licensing to a consumption-based token model where they generate revenue based on the actual volume of work and automated tasks that their assistance come And because this platform is essentially acting as a an AI control tower, corporate clients are heavily utilizing ServiceNow to govern and secure the security risks of all their adjacent machine and AI identities. So, it makes it like this essential operational dashboard behind the scenes. And when a company can charge based on the direct output that its software provides rather than the old flat user fee model, the potential for, you know, incremental margin expansion it is really impressive. I mean, they have an enterprise footprint that they can continue to scale. And the number of clients that are spending over $1 million specifically on their Now Assist product has grown by more than 100% year over year. And that tells you that these major enterprises are writing massive checks because the financial ROI of assisting human teams and streamlining operations in this way is immediate. It's significant. One final thing I'll note, I mean, ServiceNow has historically had and continues to have very minimal customer friction. They don't have to convince an enterprise to install a new software system or migrate decades of of corporate infrastructure. And the agents are deployed directly on top of the ServiceNow workflows that these businesses already rely on every single day. So, essentially you've got a zero friction upgrade path that maybe some of the more legacy software providers would struggle to match. So, I think what we are seeing and going to continue to see is as these large corporations, as the Fortune 500 is looking for ways to optimize their efficiency both in the AI revolution and also because of macro pressures, ServiceNow's automated agent tier is becoming a very logical line item for these companies to to lock in uh you know, compounding growth. And this can also, of course, be hugely beneficial for ServiceNow and for its long-term shareholders. >> Thank you, Rachel. And before we move on to stock number three, a few things that I really liked about uh Service Now. Like you mentioned, right? And it's interesting that these a lot of software companies are either focusing to recreate their business model. It's no longer just a seat or head count only type of margin. We're seeing players go from head counts plus more or even how Service Now is is going more towards kind of consumption-based. But, it does seem like at least one thing is true within this SaaS apocalypse, is that there has to be a shift in how software businesses were run before compared to how they should be running in this AI age era. The second thing I really did enjoy was you you mentioned it. This is a company that has a massive enterprise footprint, meaning that if they need to upsell any form of AI agentic tool solutions, it's very easy for them to be, "Hey, guys, you already have a contract with us. Look at this something else that we also have in the works. It's probably going to be very easy for you guys to implement since you already know what type of workflows you guys are working on. And the third thing, Rachel, is something that has recently popped up in their most recent earnings, the CEO did mention that they recently made an acquisition of a cybersecurity company, and now Service Now is in the cybersecurity space, which I personally believe, unfortunately, with the good of AI comes bad, and with that bad, you do need to have some strong defense system. So, I wonder how I'm curious to see how that cybersecurity play plays out in the long term of things. But, it is something that is also worth noting uh for uh Service Now investors. Uh that Now, Rachel, I'll pass it over to you for stock number three. >> Well, I wanted to talk about Oracle, and I think there's a lot of mixed thoughts about this stock in the world of investors. But, I you know, there's a few points I want to make about this. AI agents are only as smart as the data they can access, and for decades, the world's most critical enterprise data has lived inside Oracle's relational databases. And so, if you have, you know, an autonomous agent that's tasked with assisting a manager with uh say supply chain optimization, or executing a corporate audit, or updating global inventory records, this requires very secure, real-time access to these massive uh databases. And Oracle has aggressively upgraded its database architectures to natively support these vector searches, agentic AI pipelines, and that's keeping their enterprise client base really well locked into their ecosystem. I mean, their fiscal 2026 results, they saw cloud infrastructure revenue up almost 80% year-over-year to $18 billion fueled by this shift. And Oracle's cloud infrastructure, or OCI, has become a top destination for training and deploying these agents because of its very optimized bare-metal cluster networking. You know, previously we had seen Safra Catz had issued last year a bold guidance projection saying that OCI revenue would grow to between 18 billion to 32 billion, but eventually scale towards 144 billion over the next few years based on the mountain of contracted backlog that Oracle has. You know, they've seen their remaining performance obligations balloon by 85 billion in a single quarter, recently hit a record of over $630 billion. They're building out dozens of multi-cloud data centers directly inside competitors like Amazon Web Services, Google Cloud, Microsoft Azure. And this is also causing their their multi-cloud database revenue to grow by triple digits. I think one of the things that maybe is not always immediately clear when we're talking about AI agents is they can't function if it takes too long to fetch that data from a legacy system. And the speed that Oracle brings to this equation at the database layer means that they're effectively the gatekeepers of this information that these new digital assistants need to be helpful. Now, I you know, I'm very well aware that Oracle is spending aggressively. They're allocating tens of billions of dollars of CapEx to build out computing power. Now, the idea that they're putting forward is that their unprecedented contract backlog can help to offset that obviously aggressive spending that the spending is backed by guaranteed enterprise demand. You know, we're at a time where many tech valuations look stretched. We obviously have seen Oracle stock pull back significantly in recent months, but I also think to put the scale of Oracle's moat into perspective, you got to look into their multi-cloud dominance. By putting their database infrastructure directly inside the likes of, you know, Alphabet, AWS, and Azure, they have somewhat neutralized the threat of customers leaving their ecosystem because an enterprise can build their autonomous assistant on any cloud platform they prefer. But the actual intelligence, the actual corporate data that is feeding that agent is still running through Oracle's database. So, I think that it's a very interesting pivot that we're seeing from Oracle. You know, they are essentially taking a legacy database giant and trying to turn it into the foundation of next-gen corporate automation. I think it remains to be seen whether they will succeed in the way that management is projecting, but I think what we are already seeing is that there is still an incredible runway of growth for this business. And, you know, I won't say it's for those who don't have at least a a certain tolerance for risk, but I do think this is a really, really interesting business. Maybe one that we're not talking about as much in the uh midst of the AI revolution. >> Definitely, Rachel. I mean, I two points that that really scream out to me was first just kind of like that massive backlog north of $600 billion. And obviously with that kind of backlog, if you're making that kind of promises to your customers, you need to build up that AI infrastructure to be able to support it. So, unfortunately for investors, you need to pick up to debt first before you start collecting that revenue. So, I can see why investors are a bit worried, but backlogs does look impressive. And And like you mentioned, I mean, one of many people just see Oracle as a neo cloud player. But, the great thing about this one is it's not a neo cloud player, right? It's It has massive AI infrastructure. Or men might even call it a hyper scalar as well instead of a neo cloud, but it has a huge data set amongst all cloud server providers. And that data seems to be a bottle neck for a lot of these AI agents. So, if you have all the data and you have the infrastructure, it just makes perfect sense. Now, unfortunately, Rachel, I'm going to say I feel bad for Oracle investors for two reasons. Because both these businesses get punished. The The AI infrastructure side gets punished for the debt even though it has massive RPO. And then the software side gets punished for just AI is going to to end all software space. But, as we as you discussed, there is data that shows that's not true and that there is a huge opportunity here. But, regardless, I still believe, like you mentioned, this is one where you need to have a nice risk tolerance. You need to have a tolerance on high volatility cuz this is a stock that's going to move a lot a lot based on just random AI news on random software news on random data center news as well. >> Yeah, absolutely. I think the bottom line takeaway here is the enterprise software landscape is undergoing a huge paradigm shift. And I think the software companies that win in this next era, it won't be the ones with the flashiest chatbots. It's going to be the companies whose software can independently execute that real economic work alongside human teams. The ones that are providing the real value and have that existing infrastructure of clients across industries that can drive their growth forward. And you know, we think Synopsys, ServiceNow, and Oracle could play really vital roles amidst that those foundational infrastructure and application layers that are powering this multi-billion dollar agentic cycle. But, we want to hear from you guys. Let us know in the comments below which software stocks you think might be best positioned for the agentic era. And, don't forget to like and subscribe, and we'll see you right here in the next video.