A software analyst says he doesn’t expect the sector will fare as well in 2024 as it did during the AI hype of last year, but he still sees buying opportunities in the space.

Gil Luria, senior software analyst at D.A. Davidson, told BNN Bloomberg he expects this will be a “tough year” for software companies.

“Software companies’ stocks all went up a lot last year based on AI expectations and expectations for a spend recovery,” Luria said in a Tuesday television interview.

“If that doesn’t happen this year, only the most durable companies that are most entrenched with their customers, or the companies that have unique vertical exposure are going to do well, and these three companies are examples of those themes.”

He recommended Dynatrace (DT NYSE), AppFolio (APPF Nasdaq) and Phreesia (PHR NYSE) as his top picks in the software sector.

Neither Luria, his family, his clients nor his firm hold shares of the stocks listed above. None of the companies mentioned are investment banking clients at his firm.

For the full interview, click on the video at the top of this article.