The AI market correction is an early and significant test of investors' resilience in the space. While even some of the biggest tech stocks with an AI footprint have lost ground in recent weeks, smaller and less proven names may be particularly volatile.
For aggressive AI bulls unafraid to take on a bit of heightened risk amid turbulence, there may be opportunities to buy the dip and eventually reap big rewards.
Lesser-known AI software companies may be a good place to start a search for potential candidates, though it helps to have some reassurance that these firms have strong fundamentals. Each of the firms below has had a recent ratings upgrade or price target boost by one or more Wall Street analysts.
Despite a Crowded Field of Competitors, Klaviyo Finds a CRM Niche
Klaviyo Inc. (NYSE: KVYO) operates a customer data platform and provides marketing automation software used by e-commerce businesses. The company's tools help clients to personalize communications and customer support using AI. This does make Klaviyo a competitor to larger rivals like Salesforce (NYSE: CRM), although it caters more to smaller companies rather than those seeking enterprise customer relationship management (CRM) solutions.
In the last several weeks, KVYO shares have seen a new Buy rating from Goldman Sachs analysts and a $3 price target boost from Citigroup. The stock possesses a Moderate Buy rating overall, with 18 Buys compared to just three other ratings. Wall Street sees about 65% in upside for KVYO, a big turnaround after the stock has shed roughly 40% year to date (YTD).
Klaviyo's fundamentals may support this kind of growth, as seen in its Q1 2026 earnings report—revenue climbed by an impressive 28% year over year (YOY) while the firm achieved its highest-ever non-GAAP operating margin. Management also raised full-year guidance for revenue and operating income, citing the strength of the company's AI-driven products such as Composer and Customer Agent.
A catalyst from an upcoming earnings report could help reverse the recent decline, but Klaviyo must face the question of carrier fees, which the company has so far absorbed but could pose a greater threat as its business grows.
A High-Risk, High-Reward Proposition in Similarweb
The smallest of these three companies and in some respects the riskiest for investors at this stage, Similarweb Ltd. (NYSE: SMWB) uses AI to collect and analyze data from internet traffic, app usage, and more to provide customer analytics tools for businesses. Its proprietary dataset is a strong asset, as is its ability to serve clients across enterprise businesses, investor groups, government agencies, and more.
A major price target boost by Citigroup analysts in July may have helped to increase visibility for SMWB among investors, but the stock remains a consensus Hold overall. Interestingly, it has largely bucked the AI industry dip and is only down about 5% YTD, while still retaining upside potential of 17%.
In June, Similarweb announced two multi-year enterprise contracts representing a combined $47 million in total contract value recognized in the coming three years. This is a major development for the company and a signal that it is gaining recognition for its ability to train large language models (LLMs). If it is able to maintain this trajectory, the company may be able to accelerate revenue growth over its 10% YOY improvement from the last quarter.
Braze Builds Stability Amid Growing Revenue, Margins, and Free Cash Flow
Braze Inc. (NASDAQ: BRZE) is also in the business of automating marketing, like Klaviyo. While the companies take different approaches, Braze also faces threats from established competitors like Salesforce. One thing that distinguishes Braze from Klaviyo is its focus on enterprise customers, which gives it a large addressable market. The company has also retained customers quite well.
Braze also seems to have the strongest ratings profile of the three companies, with 19 Buys and just a single Sell. JPMorgan Chase analysts boosted their price target earlier in July, bringing the upside possible based on a consensus price target of $34.76 to about 40%.
With $211 million in revenue last quarter, a 30% YOY improvement, Braze also has a solid sales foundation. Margins are doing well, with management expecting a 400 basis point expansion to operating margin for the full year as well. Free cash flow is also emerging, and Braze noted $27 million in this area in the latest earnings report. This is all thanks to strong customer momentum, net additions, and the firm's standout AI products. While competition remains fierce, Braze is establishing itself as a solid option among the smaller AI software providers.
The article "3 Unique AI Software Plays With Strong Analyst Support" first appeared on MarketBeat.
