Jefferies’ top software stocks to own led by Microsoft, Meta

Investing.com -- Jefferies is urging investors to remain selective in software in 2026, arguing that growth “decelerates and lags versus other sectors like semis,” and recommending an underweight position until artificial intelligence monetisation becomes more visible.

Analyst Brent Thill said “’26 will be another year of gradual AI monetization,” adding that more meaningful acceleration is needed to “ease AI disintermediation fears.”

Jefferies’ top mega-cap picks are Microsoft and Meta, alongside large-caps Intuit, Atlassian and Oracle. Mid-cap preferences include Procore, Unity and Wix, while Upwork leads its small-cap selections.

The analyst added that he “remains confident that value will ultimately accrue to the software layer,” noting that with valuations back to historical averages there is “ample room for multiple expansion once AI monetization begins to lift growth.”

The bank prefers infrastructure software in the first half of the year, but argues that “the universally negative application sentiment is not grounded in realities” and expects sentiment to improve later in 2026.

In the same note, Jefferies upgraded IBM to Buy and downgraded Adobe to Hold to reflect that shift.

Jefferies’ 16 predictions for 2026 highlight strong AI tailwinds for Microsoft, a “broad-based AI resurgence” at Meta, an Amazon rebound driven by AWS and a reacceleration at Oracle.

The bank also expects applications to “rise from the ashes,” continued momentum at Unity and a sharp pick-up in software M&A as “low multiples and rates fuel an M&A and activism boom.”

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