Investing.com – Scotiabank began coverage of 13 software companies in a note Tuesday, reflecting a balanced view of the sector amid changing market dynamics.

Analyst in Scotiabank (TSX:) highlighted the importance of AI-based strategies in addressing the opportunities and challenges facing the software industry.

Companies included are Salesforce (NYSE:), Workday (NASDAQ:), ServiceNow (NYSE:), Autodesk (NASDAQ:), and Monday .com, all rated Sector Outperform (SO).

For Salesforce (CRM), Scotiabank has a $425 price target, implying an upside of 24.6%. The report highlights Salesforce’s focus on cloud data and the potential of AI tools like Agentforce to support the adoption of multi-cloud solutions.

Similarly, Workday (WDAY) is rated SO with a $340 price target, reflecting confidence in subscription revenue growth of approximately 15% over the next two years.

Here is the full list of companies covered:

• Autodesk (ADSK): Outperforming the Sector; Price Objective (NYSE:) $360

• Asana (ASAN): Sector execution; Target price $15

• Salesforce (CRM): better performance in the sector; Target price $425

• Sprinklr (CXM): Sector Performance; Target price $7.70

• Daily Strength (DAY): Sector Execution; Target price $75

• Intuition (NASDAQ:): Sector Performance; Target price $700

• monday.com (MNDY (NASDAQ:)): Top Sector Performer; Target price $325

• ServiceNow (NOW): Better sector performance; Target price $1,230

• Sprout Social (NASDAQ:): Sector Performance; Target price $28

• Veeva Systems (NYSE:): Perform Sector; Target price $235

• Business day (WDAY): Better results in the sector; Target price $340

• Zoom for video communication (NASDAQ:): Sector Performance; Target price $85

• ZoomInfo Technologies (ZI): Perform Sector; Target price $10.30

The bank suggests that companies with powerful AI integration strategies, such as Salesforce and ServiceNow, are well-positioned to outperform. Meanwhile, entities facing macroeconomic pressures, such as Sprinklr and Sprout Social, may face obstacles in achieving growth targets.

They explain that companies like Salesforce, Workday, and Monday.com consistently outperform benchmarks like IGV Software Index (ETR:) (+29% YTD).

On the other hand, they note that others such as Asana and Sprinklr have seen year-to-date declines, highlighting the sector’s volatility. AI adoption remains crucial, and market leaders are leveraging the benefits of data to deliver measurable ROI through pioneering solutions.

Despite challenges including inflation and higher Treasury yields, Scotiabank remains sanguine about companies that can navigate economic pressures and leverage AI monetization. The analyst noted that the “fastest growers” and those who demonstrate clear AI-driven operate cases are best positioned for long-term success.