Weakened by AI...Salesforce (CRM) and ServiceNow (NOW) Shift to 'Buy' Rating

▲ Salesforce (CRM), ServiceNow (NOW)/AI Generated Image

ServiceNow (NOW) and Salesforce (CRM), which had been suppressed by the fear of artificial intelligence (AI), have been re-evaluated as buying opportunities after a sharp decline, putting Wall Street's sentiment towards software stocks at a crossroads once again.

According to investment specialized media MarketWatch on July 1 (local time), Guggenheim analyst John DiFucci upgraded his investment opinions on ServiceNow and Salesforce from Neutral to Buy, respectively. DiFucci maintained his existing view that artificial intelligence poses a “significant threat” to software companies but noted that this threat is not a “death sentence” for the entire industry.

These two stocks are considered leading examples of those that have experienced significant declines in the software sector this year. ServiceNow has fallen 33% since the beginning of 2026, and Salesforce has dropped 38%. DiFucci explained that this upgrade is not based on a judgment that the two companies are definite beneficiaries in the age of AI, but rather an assessment that their stock prices have become excessively low after a sharp decline.

For ServiceNow, the potential for recovery in demand from the US government sector was presented as a key rationale. Based on conversations with management, DiFucci saw a possibility that the US government sector's trend could improve as the impact of delayed procurement and organizational restructuring due to federal spending adjustments eases. However, he emphasized, "I did not upgrade the investment opinion because I see ServiceNow as an AI beneficiary," pointing out that AI monetization is unlikely to be immediately visible, and related risks are significant.

Regarding Salesforce, he concluded that the worst-case scenario reflected in the stock price does not align with reality. DiFucci noted that Salesforce is trading at 3.7 times its enterprise value to estimated revenue for the next 12 months, calling it "extremely undervalued." He analyzed that even if the company finds it difficult to achieve significant growth, it is unlikely to experience the level of decline implied by the current stock price.

Market reactions were immediate following the upgrade in investment opinions. Salesforce's stock price rose 4.2% on Wednesday, and ServiceNow increased by 6.6%. Although concerns remain that AI could disrupt the business models of traditional software companies, analyses suggesting that excessive fear was first reflected in stock prices have led to renewed expectations for a rebound in software stocks.

[Article Key Summary]

-Guggenheim analyst John DiFucci upgraded his investment opinions on ServiceNow and Salesforce from Neutral to Buy.

-ServiceNow and Salesforce have fallen 33% and 38% respectively since the beginning of 2026, taking a direct hit from the AI-driven sell-off in software stocks.

-DiFucci believes that AI risks are real but judged that the worst-case scenario reflected in current stock prices is excessive.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*