William Blair completely revamped how it rates AI companies. These 7 stocks emerged as the winners.

William Blair reassessed its AI stock coverage using a new framework.
They focus on metrics, including the ability to execute, AI defensibility, and pricing models.
Seven stocks came out as AI winners, while four names were downgraded to underperform.

Analysts at William Blair reexamined their framework for rating AI stocks after the bout of disruption fears upended the market earlier this year

AI hype morphed into AI fear, fueling a massive sell-off in exposed names. New AI tools and a hypothetical doomsday scenario stoked investors' worries that AI will displace current leaders in software across industries.

"Put simply, against a backdrop where AI changes everything, shouldn't we change the lens through which we evaluate the companies under our coverage?" William Blair said of its review of AI names.

The analysts identified four criteria to determine which AI stocks are positioned to be winners or losers in the new era of AI.

Ability to execute: "We measure a company's ability to execute by looking at the quality/continuity of its leadership team, its culture of winning, and its demonstrated track record of product innovation, go-to- market excellence, and financial performance."
AI defensibility: "AI defensibility is a function of: A) proprietary data and telemetry, B) deep workflow integration/ecosystem and corresponding network effects, C) platform stickiness/switching
costs; D) trust and control plane footprint (security, validation, and governance will be increasingly critical in the age of AI), and E) distribution."
Pricing model: "We evaluate pricing models through the lens of structural risk introduced by AI, particularly the potential
displacement of knowledge workers and software engineers over time. While the magnitude and timing of this impact remain
uncertain, we believe consumption-based, capacity-based, and usage-aligned pricing models are inherently better insulated than
seat-based approaches."
Likelihood of organic revenue acceleration: "In this more unpredictable period, we think organic revenue acceleration is the most tangible yardstick for measuring company performance and positioning. This criterion is intentionally straightforward:
either AI is acting as a growth tailwind or not."

Using these four metrics, William Blair rerated its AI stock coverage list, utilizing a 20-point system, spread out across five points for each metric, to determine which names were best and worst positioned.

None of the stocks received a perfect score of 20, but some came close.

Here are the 7 winners and 4 losers of the AI rating revamp

Everpure

Ticker: PSTG

12-month return: +25%

William Blair's score: 19 out of 20

Everpure, formerly Pure Storage, came in with the highest score in the analyst's coverage universe. The storage and data management platform maker lost only one point in the pricing model criteria, with perfect fives across the board for all other metrics.

DigitalOcean

Ticker: DOCN

12-month return: +126%

William Blair's score: 19 out of 20

DigitalOcean is the only other stock that William Blair gave a nearly perfect score. The cloud service provider lost one point on its ability to execute.

Snowflake

Ticker: SNOW

12-month return: +5%

William Blair's score: 17 out of 20

Snowflake, another data platform provider, received a lower score than other top-rated peers, but still made it into William Blair's outperform list. The company received four out of five for its ability to execute, AI defensibility, and likelihood of organic revenue acceleration, and a perfect five score on its pricing model.

MongoDB

Ticker: MDB

12-month return: +40%

William Blair's score: 16 out of 20

MongoDB, a cloud database company, scored 4 out of 5 across all criteria, with an overall score of 16 that just meets William Blair's outperform rating.

Rubrik

Ticker: RBRK

12-month return: -28%

William Blair's score: 16 out of 20

Rubrik's overall score tied with MongoDB, receiving an outperform rating, but it's criteria specific scoring was more complicated. The data security platform company had a perfect score on its ability to execute, but received fours on AI defensibility and its pricing model, and a three on its likelihood of organic revenue acceleration.

Microsoft

Ticker: MSFT

12 month return: -4%

William Blair's score: 16 out of 20

Microsoft scored perfect fives on its ability to execute and AI defensibility, but was dinged with threes for its pricing model and likelihood of organic revenue acceleration.

The stock has been named in other firms' recent top stock picks, including Jefferies, Wedbush, JPMorgan, and DA Davidson.

JFrog

Ticker: FROG

12-month return: +27%

William Blair's score: 16 out of 20

JFrog, a software supply chain solution provider, scored perfectly on its ability to execute, but was given fours for AI defensibility and its pricing model, and a three for likelihood of organic revenue acceleration.

Like Microsoft, JFrog was among JPMorgan analysts' top stock picks after the AI sell-off.

Backblaze

Ticker: BLZE

12-month return: -33%

William Blair's score: 10 out of 20

Backblaze was downgraded to an underperform rating based on the new ratings system. A score of 10 classifies a stock as underperform in William Blair's view. The analysts said the stock is highly exposed to risks given its status as a pure-play in cloud storage.

N-able

Ticker: NABL

12-month return: -35%

William Blair's score: 10 out of 20

N-able was also downgraded to underperform, with William Blair saying the "low cumulative score reflects an uneven execution track record, a largely seat-based pricing model, and questionable prospects for organic revenue growth acceleration."

GitLab

Ticker: GTLB

12-month return: -58%

William Blair's score: 9 out of 20

Gitlab was downgraded to underperform, with the analysts saying the company's low score reflects concerns across all criteria considered.

Dropbox

Ticker: DBX

12-month return: -11%

William Blair's score: 8 out of 20

DropBox was the lowest-scoring stock in William Blair's coverage, causing the analysts to downgrade it to underperform. They flagged structural growth challenges, ongoing execution issues, its seat-based pricing model, and unproven AI tools.

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