MW These AI 'loser' stocks were left for dead. Now it might be their turn to rally.

By Christine Ji

From Salesforce to Duolingo, some of the biggest AI losers of the year are quietly building powerful comeback stories. Here's why their stocks deserve a second look.

Shares of software companies like Salesforce have stumbled in 2025, but some strategists believe the selloff is an unfair overreaction to AI fears.

As the rift between the artificial intelligence "haves" and "have nots" grows in the stock market, some investors may have thrown the baby out with the bathwater.

For contrarian stock-pickers, opportunities abound among the losers, as some of the worst-performing stocks in the S&P 500 Index SPX look ripe for a rebound after unfairly selling off on AI fears.

The belief that AI will render traditional software business models obsolete has been a big contributor to the underperformance of numerous stocks this year. Investor pessimism has been further stoked by a recent MIT report which showed that 95% of generative AI pilots produced no measurable returns for companies. Salesforce Inc. is a poster child of this phenomenon, as the stock has declined 29% since the beginning of 2025.

However, Salesforce (CRM) is one of Citizens analyst Patrick Walravens' top AI picks, thanks to the company's "Agentforce" product, which aims to help companies build and deploy AI agents.

Most of the beaten-down stocks representing the "super low-hanging fruit" AI opportunities are in the business of customer-relationship management, Walravens said. He sees some "absolute no-brainer" applications such as the ability for these companies to use AI to automatically generate meeting summaries. Salesforce's AI business is especially well-positioned because its tools can be trained on the vast amounts of proprietary data from its existing customer base.

Ted Mortonson, managing director at Baird, thinks Salesforce is a must-own for anyone betting on the future of AI. "If you believe in agents, you better own CRM," Mortonson told MarketWatch. That's because much of the massive demand for cloud computing is predicated on AI agents successfully driving revenue growth among all parts of the economy, not just the AI "picks and shovels" companies that have been successful thus far.

Both Mortonson and Walravens emphasized that adoption of AI agents will take time. Walravens argued the results of the MIT report are not an indictment of the technology, but rather a reflection of businesses still being in the early stages of implementation.

Mortonson anticipates that Salesforce and other software names such as Workday Inc. (WDAY) will be "coming off the bottom" soon as AI utilization ramps up. Shares of Workday have declined nearly 10% since the beginning of the year, but there are green shoots for the stock: The company announced the acquisition of AI startup Sana, and Elliott Management disclosed a $2 billion stake in September.

Read: AI is eating software, and Adobe is on the menu. Why the stock could be in trouble.

In the area of consumer technology, Duolingo Inc. (DUOL) has been an unpopular name, as investors question the durability of its business model in a time where free AI chatbots look like a compelling alternative and Apple Inc. began rolling out AirPods that can translate languages automatically.

However, Needham analyst Ryan MacDonald sees several areas where Duolingo can thrive as AI technologies advance.

In a September note, MacDonald highlighted Duolingo's video-call capabilities, which allow users to practice their language skills with an AI agent. MacDonald sees continued investment into the video-call offering as key to opening up the "advanced-learner market opportunity" and increasing the company's average revenue per user.

Meanwhile, Duolingo's Chess course, through which users play against an adaptive AI agent that adjusts to a player's skill level, is another growth driver. Launched in June, Chess has led to a significant increase in users and will continue to do so with its recent expansion to Android, MacDonald wrote.

Both of these features provide a more specialized user experience, which can help differentiate Duolingo's products from commodity AI technology.

FactSet Research Systems Inc. $(FDS)$, which sells market-data solutions, also provides a promising opportunity, according to UBS analyst Alex Kramm.

Down over 40%, FactSet is the eighth-worst-performing company in the S&P 500 Index SPX year to date. At current levels, the stock is pricing in low single-digit growth, which Kramm believes is too conservative for a market leader protected by high switching costs and regulation.

"We believe the market does not fully appreciate the stickiness of [FactSet's] solutions in a slow-moving industry," Kramm wrote in a September note. Additionally, the company "has actually shown that it can integrate AI quickly," with management characterizing its AI solutions as a "deciding factor" in client renewals and new signings.

Disruptive technologies are difficult to model, creating short-term valuation gaps, Mortonson said. For those willing to bet on downtrodden stocks, that means there's a lot of potential upside.

Just ask those who looked past Wall Street's deep-seated skepticism of Alphabet Inc. $(GOOG)$ $(GOOGL)$ earlier this year and got rewarded with big gains. The stock is up more than 75% from its 2025 low.

Also read: The old software investing playbook is dead. Here's where to put your money now.

-Christine Ji

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October 03, 2025 06:30 ET (10:30 GMT)

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