3 Battered Software Stocks Poised for a Strong Rebound After the AI-Driven Selloff

The software sector has taken a beating amid AI disruption fears.
While this has created a challenging environment, it has also unearthed compelling opportunities in high-quality companies.
These battered leaders now trade at deep discounts to fair value, setting the stage for a potential rebound that could turn pain into profit.

The software sector has taken a beating recently as fears that advanced AI agents could displace traditional SaaS platforms triggered a market rout that erased more than $1 trillion in value.

But broad-based selling has also created opportunity. Several proven companies with strong balance sheets, durable growth, and clear competitive moats have been marked down, alongside more speculative names, setting up attractive entry points.

ServiceNow (NYSE:), Autodesk (NASDAQ:), and Zscaler (NASDAQ:) stand out as three high‑quality software names whose stocks have pulled back meaningfully year to date, but whose underlying businesses remain structurally strong. That combination of short‑term pain and long‑term strength makes them compelling rebound candidates as sentiment toward software stabilizes.

1. ServiceNow

Current Price: $96.44
Fair Value Estimate: $130.20 (+35% Upside)
YTD Performance: -37.1%

Down approximately 37% year-to-date, ServiceNow has seen its stock pressured alongside its SaaS peers, but its business fundamentals have never been stronger.

Source: Investing.com

Despite the markdown, ServiceNow remains the undisputed leader in IT service management and digital workflows. Its platform is increasingly becoming the “operating system” for enterprise AI. Products like Now Assist have driven explosive growth in AI-related annual contract value, while acquisitions such as Moveworks have accelerated generative AI capabilities across billions of transactions and monthly active users.

Wall Street remains overwhelmingly bullish. InvestingPro’s Fair Value price target sits at around $130, implying 35% upside from current levels, while the vast majority of analysts rate the stock a Buy or Strong Buy. At less than 25x forward earnings estimates (with 24% expected EPS growth), the valuation is near its five-year low.

Source: InvestingPro

For investors seeking a rebound play, ServiceNow offers a rare combination of sticky enterprise relationships, accelerating AI momentum, and a valuation reset that makes the risk/reward highly attractive.

2. Autodesk

Current Price: $243.16
Fair Value Estimate: $326.35 (+34.2% Upside)
YTD Performance: -17.9%

Autodesk shares are down roughly 18% year-to-date. While less severe than peers, the decline still reflects the sector-wide AI panic and a recent Citi downgrade citing near-term software headwinds.

Source: Investing.com

Yet Autodesk’s core business—cloud-based design and engineering software for architecture, engineering, construction, media, and manufacturing—remains exceptionally resilient. AI is emerging as a genuine tailwind: Autodesk is embedding generative design tools and automation directly into its flagship products, helping customers accelerate complex projects rather than rendering its software obsolete.

Analyst consensus is a solid Buy, with average 12-month price targets near $329, while Fair Value models point to 34% upside from current levels. Furthermore, the company boasts best-in-class profitability, with a 26.7% ROIC and 39.7% ROE.

Source: InvestingPro

With the stock still below prior peaks and trading at a discount to where it might reasonably sit in a normalized environment, ADSK looks like a classic high‑quality “software on sale” story for those willing to ride out the volatility.

3. Zscaler

Current Price: $134.33
Fair Value Estimate: $166.83 (+24.2% Upside)
YTD Performance: -40.3%

Zscaler has been one of the hardest-hit names, falling approximately 40% year-to-date. The stock recently hit 30-month lows after earnings, as investors fretted over AI disruption and lighter-than-expected organic ARR growth.

Source: Investing.com

This selloff appears overdone. Zscaler is the clear leader in cloud-native zero-trust security, an architecture that becomes more critical as AI agents proliferate across enterprises. The company’s AI Security ARR surged 80% year-over-year, and its Zenith platform is positioning Zscaler to dominate machine-to-machine communication security.

InvestingPro’s Fair Value price target implies about 24% upside from current levels to around $169, with the stock carrying a Strong Buy rating. Even after recent target trims, the median analyst forecast still points to 70%+ gains ($230.45 price target).

Source: InvestingPro

At a historically low price-to-sales multiple, Zscaler trades as if AI will shrink its market—when the opposite is far more likely. The post-earnings dip has been called a “buying opportunity” by several major firms.

Bottom Line

While the near-term path for software stocks may remain volatile, the selloff has created a unique opportunity to acquire shares of exceptional companies at discounted prices. For investors with a long-term horizon, this trio represents a compelling portfolio of battered stocks with significant upside potential.

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Disclosure: This is not financial advice. Always conduct your own research.

At the time of writing, I am long on the S&P 500, and the Nasdaq 100 via the SPDR® S&P 500 ETF, and the Invesco QQQ Trust ETF. I am also long on the Technology Select Sector SPDR ETF. I regularly rebalance my portfolio of individual stocks and ETFs based on ongoing risk assessment of both the macroeconomic environment and companies’ financials.

The views discussed in this article are solely the opinion of the author and should not be taken as investment advice.

Follow Jesse Cohen on X/Twitter @JesseCohenInv for more stock market analysis and insight.