Bank of America analyst Tal Liani's team issued a research note on Wednesday, significantly raising price targets for ten software stocks, including ServiceNow (NYSE: NOW), Figma (NYSE: FIG), and Snowflake (NYSE: SNOW). The move reflects an expansion of valuation multiples across the software sector and a continuing dissipation of market concerns regarding the disruptive impact of AI.

News of slowing revenue growth at OpenAI further alleviated fears that AI would upend the software industry, fueling a broad rally in the sector. ServiceNow closed Wednesday's session up 6.5%, while Figma, Workday, and Adobe gained between 3% and 4%. The iShares Expanded Tech-Software Sector ETF (IGV) finished 1% higher.

Target Price Adjustments: Biggest Increase at 46%

The adjustments span infrastructure software, large-cap software, and application software. Workday saw the most dramatic revision, with its target price surging 46% from $140 to $205. Snowflake's target was raised to $395, the highest absolute price target among all covered names.

Rationale Behind the Hikes: Multiple Expansion and Easing AI Worries

Liani stated in the report that the revisions are "to reflect the expansion of valuation multiples across the software sector, and our views on valuations and fundamentals have not changed." The analyst attributes the recent strong performance in software stocks to three key factors: robust earnings and accelerating growth among some infrastructure software companies, a renewed recognition of value in large-cap and application software names following depressed valuations, and easing concerns about AI's disruptive impact as investor sentiment steadily improves.

Benchmark analyst Yi Fu Lee highlighted a fundamental shift in market psychology, noting that "the market is building stronger confidence in improving fundamentals and increasingly recognizing that software is becoming a beneficiary of enterprise AI deployments, rather than a victim of AI disruption." The deceleration at OpenAI has also acted as a catalyst. Reports indicate OpenAI's second-quarter revenue grew 18% quarter-over-quarter to $6.7 billion, though operating losses widened from $9.3 billion to $12.3 billion. Raymond James analyst Adam Tindle observed that the slowdown in OpenAI's growth momentum "reduces the perceived existential threat of AI potentially killing software-as-a-service (SaaS) businesses."

Stock Ratings: Divergence from "Buy" to "Underperform"

Among large-cap software names, ServiceNow and Figma carry "Buy" ratings. Liani believes ServiceNow holds an advantage in deploying agentic AI solutions, given its historical data and contextual understanding of enterprise workflows. The company's deep insight into customer operations is expected to translate into sustained revenue growth and free cash flow expansion. Workday retains a "Neutral" rating, while Adobe stays at "Underperform." Analysts contend that the recent pace of share price appreciation for these two companies has outpaced signs of a fundamental inflection point. This assessment underscores a growing divergence within the software sector: companies with clear AI monetization pathways are experiencing valuation re-ratings, while gains driven solely by sector sentiment repair may encounter ceilings.

In infrastructure software, Snowflake carries a "Buy" rating due to its consistently strong growth trajectory and AI monetization potential, while GitLab and Amplitude remain "Neutral." Within application software, Box, Asana, and Zeta are rated "Buy" based on sustainable growth prospects and emerging AI monetization opportunities.

Bank of America's comprehensive price target increases represent the latest signal of the software sector's ongoing recovery from the AI-driven selloff earlier this year. As the narrative that "AI will kill software" loses credibility, investors are refocusing on companies capable of converting AI into tangible revenue growth. As the Benchmark analyst noted, the market is "rewarding companies that demonstrate tangible evidence of AI adoption, customer spending, and monetization." ServiceNow, following its better-than-expected earnings report in late July and upward revision to subscription revenue guidance, serves as a prime example of this dynamic. Bank of America's target price adjustments now provide further endorsement of this trend from Wall Street.