Hot Picks: AI demand lifts Microsoft as software stocks struggle

Software stocks are facing pressure as investors weigh the long-term impact of artificial intelligence, but some companies are emerging as clear beneficiaries. Microsoft stands out for its broad AI strategy and growing role in enterprise adoption.

BNN Bloomberg spoke with Tyler Radke, global software analyst at Citi, who pointed to Microsoft’s strong positioning across AI infrastructure and applications, while also highlighting accelerating growth at Palantir and improving demand trends at MongoDB.

Key Takeaways

• Microsoft is benefiting from broad AI exposure, spanning cloud infrastructure, enterprise software and partnerships with multiple model providers.
• Enterprise demand for AI remains strong, with Microsoft continuing to lead vendor preference among large IT buyers.
• Palantir is seeing a sharp growth acceleration, driven by expanding commercial adoption and sustained government demand.
• AI-driven data and analytics capabilities are positioning Palantir as a key beneficiary of rising enterprise AI spending.
• MongoDB is gaining from increased demand for data infrastructure as AI-generated applications require scalable database solutions.

Read the full transcript below:

ANDREW: On Hot Picks today, we are honing in on three ideas in software. That sector has been under pressure as investors worry about AI disruption, but our guest sees potential for Microsoft, supported by its partnership with OpenAI. Let’s get more from Tyler Radke, global software analyst at Citi. Tyler, great to see you. Thanks very much indeed.

TYLER: Good morning.

ANDREW: Just remind us, what is Microsoft doing with OpenAI, and why do you see that as promising?

TYLER: Well, look, I think Microsoft was one of the first investors in OpenAI. They participated when OpenAI was valued in the single digits of billions of dollars. We just saw OpenAI raise one of the largest funding rounds ever, north of $110 billion, so they are monetarily benefiting from those higher rounds.

But I think the important thing that relates to Microsoft and their AI strategy is it’s not just about OpenAI. They’ve signed a very large commitment with Anthropic. You’re seeing them partner in terms of Copilot and leveraging some of Anthropic, Claude and co-work capabilities to improve that product.

And one of the things that we see consistently — we just put out a note yesterday where we interviewed over 100 chief information officers, or CIOs, that have oversight into billions of dollars of IT budgets — still the number one vendor people are looking to in terms of those AI investments is Microsoft.

And you can buy Anthropic and OpenAI and other models through Azure. So we just think they’re well positioned. And again, if we do see more disruption within software, people are going to be writing their own apps and leveraging more AI models. Microsoft benefits from that in arguably their most important business.

ANDREW: So they’re kind of a middleman, offering people access to these AI programs.

TYLER: Yeah, I think they’re both a middleman, but they also have several ways of actually benefiting from AI. So obviously Azure, in terms of actually running those models, providing the infrastructure to run it, but then their applications business with their Office portfolio and Copilot — they’re benefiting from AI in those businesses as well.

ANDREW: Talk to us about Palantir. They’re a favourite of security services and other sometimes shadowy users, but they’re a huge software franchise. What attracts you there?

TYLER: Yeah, well, you’re right, it has been a little bit of a secretive technology company in the past, no question. But I think one of the big things that we’ve seen over the last few years is just their breakthrough within large commercial companies.

You have big, referenceable customers out there, even like Citibank and some of these Fortune 500 companies. So we see them as a direct beneficiary of all this AI spending. If you look at their growth rates on revenue, two years ago they were growing below 20 per cent. This most recent quarter was north of 70 per cent, so you’ve seen one of the strongest reaccelerations we’ve ever seen within enterprise software.

And I think the interesting thing about this is our view is it’s still very early. I mean, you look at how many customers they have, they still have less than 1,000 customers. You compare it to any other large enterprise technology company, you know, are in the tens of thousands, hundreds of thousands, so still early innings.

And I think the government business continues to track really well, whether that’s in the U.S. and in some of the Western allied regions. And it’s not just defence. I think the defence side gets a lot of headlines, but as you think about modernization of systems across even civilian agencies, there’s a big opportunity there.

ANDREW: Your final idea is MongoDB. Can you remind us what they do? And why are you attracted to this name?

TYLER: Yeah, so I think you’ll notice a pattern with these names. These are generally more what I would call infrastructure data management companies. I think the concerns in software that you’re seeing are really on this application layer.

So companies like MongoDB are not seeing those same sorts of pressures. Certainly their stocks have been under pressure, but in terms of the fundamentals, we think they are actually accelerating and improving.

Anthropic uses MongoDB. As you think about AI agents and all this code being generated from any of these next-generation coding models, you need databases to store that code. You need databases to organize the data, to build logic, to build applications.

And so Mongo provides that. They’re one of the faster-growing scale players in the industry. So we just think they’re in a good position, given where everything is going in the software and AI space.

ANDREW: Yeah, it’s fascinating. All right, these software companies are still pretty profitable, even though investors have cooled off on them. Tyler, we’re very tight for time, but it’s still a business with pretty good margins in terms of revenue to earnings.

TYLER: Yeah. Look, I mean, I think as you look at the large companies — Microsoft, even Salesforce and Adobe — those certainly have been under more pressure. I mean, earnings are still growing.

But I think the concern, and what you’ve seen reflected in these stocks, is more in this terminal value. So the analogy is if you looked at the newspaper industry, earnings held up for five or six years after the stocks started going down. So it’s more in that long tail, more in that terminal value where people see the risk.

But I think our view is companies like Microsoft are better positioned to weather the storm.

ANDREW: Thank you very much, Tyler. Tyler Radke, global software analyst at Citi.

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This BNN Bloomberg summary and transcript of the April 10, 2026 interview with Tyler Radke are published with the assistance of AI. Original research, interview questions and added context was created by BNN Bloomberg journalists. An editor also reviewed this material before it was published to ensure its accuracy and adherence with BNN Bloomberg editorial policies and standards.