The 3 Most Undervalued Software Stocks to Buy in June 2024

Stocks to buy

The tech-heavy Nasdaq 100 has been on an impressive run this year. It is now up 15% year-to-date, outpacing the S&P 500 by a slight margin and the Dow Jones Industrial Average by a landslide. As the tech-led rally heads into summer, things will get interesting, especially for investors looking for the Federal Reserve to follow the Bank of Canada’s lead by announcing its first rate cut.

Just because Canada is cutting doesn’t mean the Fed is bound to follow shortly after. After all, inflation has hit the U.S. somewhat differently than in Canada. Either way, as other nations slash rates, U.S. investors may be positioning their bets well ahead of the Fed’s first move, especially concerning pricy tech stocks. If we are in for a lower-rate world again, perhaps today’s seemingly expensive AI-led tech leaders aren’t as frothy as they seem.

If you’re looking for undervalued software stocks, look no further than the following names, which have lagged not only the Nasdaq 100 but the market as a whole in 2024.

Undervalued Software Stocks: ServiceNow (NOW)

ServiceNow office building in Silicon Valley;

Source: Sundry Photography / Shutterstock.com

ServiceNow (NASDAQ:NOW) is an enterprise software firm that’s been dragging its feet so far this year, with NOW stock up just 2% year-to-date. Undoubtedly, the enterprise software scene isn’t as hot as it could be, given the Nasdaq’s current state and the high degree of enthusiasm surrounding today’s top AI high-flyers.

Despite clocking in a good first quarter that saw sales and subscription revenues surge 24% and 25%, respectively, year-over-year, NOW stock hasn’t been able to take off like many other AI-driven software firms. For one reason or another, investors would rather just pile in today’s “obvious” AI plays.

Many of the biggest AI winners have come from the red-hot semiconductor scene, as is to be expected in the early days of AI.

However, eventually, enterprises will want more sophisticated and specialized AI applications tailored to their businesses. Software firms like ServiceNow will have an opportunity to step up to the plate.

Moving ahead, I expect the company’s generative AI service, Now Assist AI, to start really moving the needle. Now Assist AI is one of the fastest sellers in ServiceNow’s history, and the most remarkable thing is that the product is still in its infancy. I believe it is one of the most undervalued software stocks right now.

Salesforce (CRM)

The entrance sign of Salesforce Tower, at the American cloud-based software company Salesforce's (CRM stock) Headquarters campus in San Francisco, California.

Source: Tada Images / Shutterstock.com

Perhaps Salesforce (NYSE:CRM) is to blame for the enterprise software industry’s recent woes. The company reported a devastating quarter that sent shockwaves through the software-as-a-service scene. Salesforce and other enterprise software developers are undoubtedly betting on generative AI. However, it remains unclear just when, if ever, the big returns from big AI bets will arrive.

There’s plenty of reason to stick with CRM stock, as it comes off one of its worst post-earnings reactions in recent memory. Though the stock has since ricocheted, the horrid earnings have wiped out all of the gains enjoyed for 2024. At writing, CRM shares are down more than 5% year-to-date. I guess things could have been a lot worse, given how disappointing that last result was.

Personally, I’m sticking with Benioff and the company as they embed generative AI across the board while harnessing AI for its predictive powers. From forecasting sales to predictive lead scoring, AI stands to profoundly improve the customer relationship management industry.

Intel (INTC)

Intel (INTC) logo is seen outside of the Robert Noyce Building at Intel Corporation's headquarters in Santa Clara, California.

Source: Tada Images / Shutterstock.com

It seems like everybody has given up on Intel (NASDAQ:INTC) at this juncture. The lagging semiconductor firm is coming off a tough quarter and is struggling to win back shareholder dollars. Year-to-date, INTC stock is down over 36%, while many of its peers are up by double-digit percentage points.

There’s no question that Intel has lost some ground to rivals, but don’t expect Intel’s top boss, Pat Gelsinger, to throw in the towel just yet. He’s still confident in Intel’s comeback, even if most weak-handed investors already have enough of the name and its relative lack of AI muscle.

The company recently revealed its new Xeon 6 chips, which boast notable performance and power efficiency gains compared to previous generations. In addition, the company is hoping its Gaudi 2 and 3 AI chips can take a bite out of the red-hot AI accelerator market. Will these AI chips be best-in-class?

Probably not. But with competitive pricing recently revealed, perhaps they can offer unmatched bang for the buck. Only time will tell. Though Intel’s a semi-play, I also wouldn’t discount its software prowess as the firm moves forward with its far-reaching “AI Everywhere” strategy.

On the date of publication, Joey Frenette held shares of Salesforce. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.

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