AI Software Sales Could Soar 580% by 2028: 2 AI Stocks to Buy Now, According to Wall Street

Morgan Stanley projects AI software spending to surge 580% to over $400 billion by 2028, signaling a significant market expansion. AppLovin, leveraging its AI-powered Axon engine, reported robust Q1 results with 40% revenue growth and 149% GAAP EPS growth, and analysts see 29% upside. HubSpot, despite mixed Q1 financials, is experiencing strong adoption of its embedded AI platform, Breeze, with analysts forecasting 38% upside, positioning both companies to capitalize on the accelerating AI integration across industries.

Analysis

The market for AI software is poised for substantial expansion, with Morgan Stanley forecasting a 580% increase to over $400 billion by 2028, a trend corroborated by Goldman Sachs's finding that AI adoption among U.S. companies has doubled in the last year. Within this context, AppLovin (APP) demonstrates strong operational momentum, reporting a 40% year-over-year revenue increase to $1.4 billion and a 149% rise in GAAP earnings to $1.67 per share in its first quarter. This performance is driven by its AI-powered ad engine, Axon, and supported by robust guidance for 69% advertising sales growth in the second quarter. In contrast, HubSpot (HUBS) presented mixed first-quarter results, where a 19% customer increase was offset by a 4% decline in spending from existing customers, leading to modest 16% revenue growth and a 6% rise in non-GAAP net income. Despite this near-term softness attributed to macroeconomic factors, HubSpot is seeing significant traction in its AI initiatives, with its 'Breeze' AI engine tripling Content Hub attach rates and doubling user engagement quarter-over-quarter. Both companies trade at a P/E multiple of 66, but their underlying fundamentals present different profiles: AppLovin shows clear execution and growth, while HubSpot's investment case relies on future AI monetization overcoming current customer spending headwinds.

Key Decisions for Investors

• Investors should weigh AppLovin's proven execution, evidenced by its 40% Q1 revenue growth and strong guidance, against its high valuation, making it a direct play on AI in adtech that is highly dependent on maintaining momentum.
• For HubSpot, the key consideration is whether strong AI adoption metrics can translate into accelerated revenue growth and margin expansion, a factor to monitor closely given the recent 4% decline in average customer spend.
• Given that both companies trade at a P/E of 66, any position should be sized to reflect the high-growth expectations already priced in, making them sensitive to any future earnings misses or downgrades in guidance.
• Monitor AppLovin’s advertising segment growth and HubSpot's AI product attach rates in upcoming quarters as key performance indicators to validate the investment thesis for each company.