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Investing.com -- Cantor Fitzgerald starts coverage on the application software sector, with AI a major catalyst that is set to fuel long-term growth across the group.

Customer-facing platforms were highlighted as early leaders, with Cantor naming Hubspot, Klaviyo (NYSE:KVYO)  and Q2 Holdings (NYSE:QTWO) among its top picks.

Analysts assigned an Overweight rating and $775 price target to Hubspot, implying 31% upside.

Klaviyo also received an Overweight and a $48 price target, implying 41% upside.

Q2 Holdings was rated Overweight with a $110 target, or 26% upside.

The brokerage said AI is transitioning software beyond traditional per-seat tools into systems increasingly centered on outcomes and usage-based pricing.

This shift is unlocking productivity gains across key business functions such as development, sales, HR, finance, and supply chain.

Cantor said vendors that effectively drive user adoption and workflow automation will benefit from "data gravity," reinforcing their competitive positions. It is particularly bullish on companies that are already leveraging AI to boost usage, expand capabilities, and monetize without adding friction.

Cantor noted that while valuations have rebounded since the early April lows, with the IGV software index up 29% since April 8, they remain only slightly above historical averages.

The firm sees room for further upside, arguing that AI is a more powerful and sustainable driver than pandemic-era remote work trends.

“We have a generally bullish outlook for Software at the current juncture,” analysts at Cantor said citing improving free cash flow, profitability, and more realistic growth expectations as further support for upside in software stocks.

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