Dj Servicenow Price Target Raised To $237.00/Share From $235.00 By Citigroup

Reuters

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ServiceNow Slump Highlights Software Stock Challenges in the Age of AI — Barrons.com

Dow Jones Newswires

By Martin Baccardax

Software stocks were dragged into bear market territory this week despite a better-than-expected quarterly update from industry leader ServiceNow. Investors question the sector's future when artificial technologies maintain a restless advance.

The release of new tools such as Anthropic's Claude Cowork, as well as chatbots and other AI-powered agents, is expected to both significantly reduce the need for massive software offerings and reduce the number of users who currently rely on legacy software systems.

That has hammered the value proposition of stocks in the sector and moved capital allocations away from software and into semiconductor and AI-related stocks.

Software names such as ServiceNow, Salesforce, and Adobe have been left behind in the market's broader rotation away from megacap tech giants such as Nvidia, Apple, and Microsoft and into so-called old economy sectors like energy, materials, and industrials.

"We expect a continued rotation as non-technology sectors experience growth thanks to higher profit margins through AI adoption and greater operating efficiencies," said Richard Saperstein, chief investment officer at investment group Treasury Partners.

"Investors are questioning the sustainability of software company moats as AI use cases continue to rise," he added.

The broadest benchmark of software stocks, the iShares Expanded Tech-Software Sector ETF, traded at its lowest levels in 10 months earlier Friday after slumping more than 21% from an all-time peak reached in late September.

Heavyweight stocks like Salesforce and ServiceNow, meanwhile, are down 15% and 38% respectively over the same time frame. Adobe is down nearly 20%.

The selloff has also crushed Wall Street's price-to-earnings forecasts, with software names suffering the biggest contraction in PE multiples of any subset in the technology sector, according to Trivariate Research analysts.

And the worst may be yet to come.

"Essentially, we see this much software multiple compression about once every five years, on an enterprise value/sales basis, and every 15 years on earnings," said Trivariate's founder Adam Parker.

"If history is a guide, analysts' profit margin estimates for many software companies in 2026 are way too high," he added. "Imminent and material relative downward earnings revisions are likely."

But that might also create some opportunities, according to LPL Financial's head of equity research Thomas Shipp, and "help to put some floor under the beaten-up software names."

Noting software stocks in the Russell 1000 are now markedly cheaper than their semiconductor rivals, at 32.4 times forward earnings versus 43.6 times forward earnings, respectively, "we see the potential for software to rebound relative to semis in the first quarter."

The current drawdown is similar to past points where the trend has reversed, he said, and the pair now trades at its widest discount to the 40--week moving average since 2021.

"In short, while we acknowledge the established leadership of semis, the technical setup suggests software may be nearing an important inflection point in relative performance," he said.

Write to Martin Baccardax at martin.baccardax@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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Ai Upends Software Sector, Sinking Related Etf By 6%, Servicenow By 12% Post-Results

Reuters

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Wall St futures tick down as Microsoft’s slump weighs; Apple beats forecasts

Investing.com

Advanced Micro Devices

Investing.com-- U.S. stock index futures edged down on Thursday evening after Wall Street closed largely lower, as disappointing earnings from Microsoft stirred fresh concerns about the payoff from hefty AI investments, while investors digested a barrage of other corporate results.

S&P 500 Futures inched 0.3% lower to 6,975.0 points, while Nasdaq 100 Futures fell 0.3% to 25,916.75 points by 19:36 ET (00:36 GMT). Dow Jones Futures also eased 0.3% to 49,049.0 points.

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Wall St slips as Microsoft slump weighs; Apple results in focus

The S&P 500 and NASDAQ Composite ended Thursday’s regular session under pressure, with the technology sector among the worst performers.

Microsoft Corporation (NASDAQ:MSFT) shares slumped 10% after the software giant’s quarterly results underscored slower growth in cloud revenue and record-high spending on AI initiatives that failed to ease investor concerns about near-term returns.

The drop in Microsoft weighed on broader tech sentiment, with other software stocks such as ServiceNow Inc (NYSE:NOW) and SAP (NYSE:SAP) also falling sharply after their earnings and outlooks disappointed traders.

Wall Street was also watching Apple Inc's (NASDAQ:AAPL) quarterly results reported after the bell, which showed better-than-expected revenue and profit driven by strong iPhone demand and a rebound in Greater China.

Apple posted around $143.8 billion in revenue and earnings per share well ahead of consensus forecasts, prompting shares to rise nealry 1% in extended trading.

SanDisk surges after profit beat; Trump endorses spending deal

Elsewhere in earnings, SanDisk Corporation (NASDAQ:SNDK) shares surged 16% in extended trading after the storage-chip maker delivered a significant profit beat and raised guidance, as demand for data-center and AI-related memory products outpaced forecasts.

In contrast, Visa (NYSE:V) stock dipped modestly despite beating first-quarter earnings and revenue expectations, as some investors reacted to a shortfall in total transactions processed and persistent caution around broader consumer spending trends.

On the political front, President Donald Trump publicly endorsed a bipartisan spending deal negotiated by Senate Republicans and Democrats that would avert a looming government shutdown, posting support on Truth Social and urging cooperation.

The compromise would fund most federal agencies while leaving contentious immigration issues for further negotiation.

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Wall St futures fall further with Trump set to announce next Fed chair

Investing.com

Advanced Micro Devices

-6.13%

Updates with Fed Chair context, deeper index losses

Investing.com-- U.S. stock index futures fell further in early trade on Friday with markets turning broadly cautious after President Donald Trump said he will announce his nominee for the next Federal Reserve Chair later in the day.

Weak sentiment towards heavyweight technology stocks also weighed, after disappointing earnings from Microsoft stirred fresh concerns about the payoff from hefty AI investments. Investors also digested a barrage of other corporate results, including a positive print from Apple Inc (NASDAQ:AAPL).

S&P 500 Futures fell 0.6% to 6,950.0 points, while Nasdaq 100 Futures fell nearly 0.8% to 25,801.75 points by 01:40 ET (06:40 GMT). Dow Jones Futures fell 0.6% to 48,864.0 points.

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Trump to nominate next Fed Chair on Friday morning; Warsh seen in the lead

Trump told reporters on Thursday evening that he will announce his nominee for the next Fed chair on Friday morning, and that his pick would be "somebody that could have been there a few years ago."

A host of reports said Trump will nominate former Fed governor Kevin Warsh for the role. Warsh-- who had lost out to current Chair Jerome Powell for the post in 2017-- has largely aligned himself with Trump’s calls for lower rates in the past year.

The nomination of the next Fed chair is expected to clear out a major point of uncertainty for Wall Street, as investors fret over the long-term trajectory of lending rates in the country.

But Warsh’s potential nomination also comes amid heightened concerns over the Fed’s independence, especially amid growing calls from the White House that the central bank cut rates aggressively.

The Fed had earlier this week left rates unchanged as expected, with Powell urging his potential successor to not be caught up in elected politics.

Wall St slips as Microsoft slump weighs; Apple results in focus

The S&P 500 and NASDAQ Composite ended Thursday’s session under pressure, with the technology sector among the worst performers.

Wall Street was also watching Apple Inc’s (NASDAQ:AAPL) quarterly results reported after the bell, which showed better-than-expected revenue and profit driven by strong iPhone demand and a rebound in Greater China.

Apple posted around $143.8 billion in revenue and earnings per share well ahead of consensus forecasts, prompting shares to rise nealry 1% in extended trading.

SanDisk surges after profit beat; Trump endorses govt spending deal

The compromise would fund most federal agencies while leaving contentious immigration issues for further negotiation.

Reports said Democrat and Republican leaders had also agreed to the deal, although it remained unclear when Congress will vote on the matter. Lawmakers have until midnight, Friday, to release more spending for the federal government.

Ambar Warrick contributed to this report

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