Software Stocks Face Intense Sell-Off Amid AI Fears
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Jan 29 2026
0mins
Should l Buy NOW?
Source: CNBC
- Market Sentiment Shift: The iShares Expanded Tech-Software Sector ETF (IGV) dropped about 5% in morning trading, marking its largest one-day decline since last April, indicating a sharp decline in investor confidence as the fund is now down approximately 21% from its recent high, entering bear market territory.
- ServiceNow Stock Plunge: Despite ServiceNow exceeding Wall Street's fourth-quarter earnings expectations and issuing better-than-expected guidance, its shares fell over 11% on Thursday, reflecting that stable growth is insufficient to shift the narrative in an environment of heightened skepticism towards traditional software vendors.
- Microsoft Hit Hard: Microsoft slid about 10% after reporting a slowdown in cloud growth, on track for its steepest one-day drop since March 2020, while also issuing softer-than-expected guidance on operating margins for the fiscal third quarter, amplifying investor unease.
- AI Threat Intensifies: The rapid development of artificial intelligence has heightened investor concerns about the potential erosion of demand for traditional software licenses and workflows, leading to a reassessment of valuations in the software sector as AI is perceived to potentially shrink long-term revenue prospects permanently.
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Analyst Views on NOW
Wall Street analysts forecast NOW stock price to rise
32 Analyst Rating
30 Buy
2 Hold
0 Sell
Strong Buy
Current: 107.810
Low
172.00
Averages
222.81
High
263.00
Current: 107.810
Low
172.00
Averages
222.81
High
263.00
About NOW
ServiceNow, Inc. provides an artificial intelligence (AI) platform for business transformation. The Company’s AI platform connects people, processes, data, and devices to increase productivity and maximize business outcomes. Its intelligent platform, the Now Platform, is a cloud-based solution that helps enterprises and organizations across public and private sectors digitize workflows. The workflow applications built on the Now Platform are organized into four primary areas: Technology, CRM and Industry, Core Business and Creator. Its products include IT Service Management, IT Operations Management, HR Service Delivery, ServiceNow AI Agents, AI Experience, Build Agent, ServiceNow AI Control Tower, AI Agent Fabric, RaptorDB, Workflow Data Fabric, Workplace Service Delivery, ServiceNow Platform Encryption, Telecommunications Service Operations Management, and others. The Company also offers identity security, helping organizations secure access across the enterprise.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
ServiceNow Thrives Amid SaaS Market Sell-Off
- Market Environment Analysis: While the overall market is near all-time highs, the SaaS sector has been battered, with investor confidence declining in 2026 due to growing fears that artificial intelligence will disrupt SaaS businesses, leading to significant stock price declines for many companies.
- Revenue Growth Potential: ServiceNow's subscription revenue climbed 21% year-over-year in Q4 2025, with a projected growth of 21.5% for Q1 2026, indicating strong growth potential in a competitive market, particularly driven by advancements in AI technology.
- Innovation-Driven Growth: The launch of ServiceNow's Now Assist generative AI solution has become a major growth driver, while the new AI Control Tower platform will further enhance its capabilities in managing AI agents, improving client workflow efficiency and security.
- Valuation Attractiveness: Despite the overall decline in SaaS market valuations, ServiceNow's forward price-to-sales ratio stands at 7, with a price-to-earnings ratio slightly above 25.5, suggesting that the company is likely to achieve higher market recognition and investment returns in the future, especially with the support of AI technology.
See More
Accenture Mandates AI Tool Usage for Leadership Promotions
- Promotion Requirements: Accenture has informed senior staff that regular use of AI tools is a prerequisite for leadership promotions, aiming to enhance the company's competitiveness in the AI sector and ensure employee skills align with market demands.
- Employee Reskilling Initiative: CEO Julie Sweet stated that 550,000 employees have been reskilled in generative AI fundamentals, highlighting the company's commitment to skill enhancement and laying the groundwork for future business transformation.
- Global Employee Impact: While the policy applies to most employees, those in 12 European countries and the division handling U.S. government contracts are exempt, reflecting the company's flexibility and adaptability on a global scale.
- Strategic Partnerships: Accenture has recently partnered with companies like OpenAI and Anthropic to provide AI tool training for tens of thousands of employees, further solidifying its leadership position in AI technology application.
See More
Valuation Challenges Intensify for Tech Stocks
- Tech Stock Sell-off: A wave of selling in technology shares is occurring as investors express uncertainty about their future value, particularly as price-to-earnings ratios shrink dramatically, which negatively impacts overall investment sentiment.
- Danaher-Masimo Acquisition Risks: Danaher is acquiring Masimo at nearly 25 times next year's earnings, despite the latter's inability to justify its multiple over the years, raising concerns that could adversely affect Danaher's stock performance.
- CrowdStrike-Microsoft Partnership: CrowdStrike's Falcon platform is now available on the Microsoft Marketplace, which could significantly boost revenue; however, its current P/E ratio of 85 has led to a tepid market reaction, reflecting investor anxiety over high valuations.
- ServiceNow Management Confidence Issues: Despite ServiceNow's announcement of a $5 billion stock buyback and intentions from executives to buy shares, the stock price still fell, indicating market skepticism about its growth prospects amid intensifying AI competition.
See More
Shift in SaaS Business Models Amid AI Disruption
- Shift in SaaS Models: Zavery highlighted that the SaaS business model is transitioning from merely increasing user seats to offering AI-driven platforms that automate work, warning that companies failing to adopt the latest technology risk obsolescence.
- Market Pressure on Software Stocks: Amid rising fears of AI disruption, software stocks have faced broad selloff, with the Nasdaq 100 index declining 1.4% since the start of the year, indicating a pessimistic sentiment towards tech stocks.
- Software Darwinism: Zavery referred to the current market dynamics as 'software Darwinism,' suggesting that companies unable to transition to AI platforms will be forced out of the market, reflecting intensified competition within the industry.
- Optimistic Outlook for ServiceNow: Despite ServiceNow's shares being down about 30% year-to-date, Zavery remains optimistic, suggesting that the ongoing market upheaval could serve as a tailwind for the company, indicating potential opportunities amidst the disruption.
See More
Microsoft Board Member Buys $2 Million in Stock Amid Bearish Sentiment
- Insider Buying Signal: Microsoft board member John Stanton purchased 5,000 shares at $397.35 each on Wednesday, totaling nearly $2 million, which may provide reassurance to investors amid pressures from AI-related capital spending concerns.
- Poor Market Performance: Microsoft stock has declined over 17% year-to-date, making it the worst performer among the Magnificent Seven, reflecting ongoing investor fears that AI tools could diminish software demand and negatively impact business models.
- Capital Expenditure Plans: Microsoft announced a 70% increase in capital expenditures to $110 billion, raising investor concerns about future profitability, particularly as tech stocks face significant pressure.
- Retail Sentiment Analysis: Despite Stanton's purchase being perceived as a bullish signal, retail sentiment on Stocktwits remains in the 'bearish' zone, indicating cautious investor attitudes towards Microsoft's future performance.
See More
Analysis of the Reasons Behind Software Stock Pullback
- Market Sentiment Shift: In 2025, Palantir Technologies has seen its stock price drop about 22%, while Adobe, Salesforce, and ServiceNow have all slid between 25% and 30%, indicating increasing investor concerns about software stocks despite strong performance reports from these companies.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have run ahead of their underlying fundamentals, leading to a market reassessment of these high-valuation stocks, which could further depress prices.
- Misunderstanding of AI Impact: While AI is viewed as a potential disruptive force, analysis suggests that its application is actually helping incumbents enhance their competitive advantages rather than simply threatening their market positions, indicating that market fears regarding AI may be misguided.
- Long-Term Growth Potential: Despite Palantir's stock price decline year-to-date, it has risen over 80% since the beginning of 2025, reflecting strong revenue growth and profitability, suggesting market recognition of its long-term growth potential.
See More
ServiceNow Thrives Amid SaaS Market Sell-Off
- Market Environment Analysis: While the overall market is near all-time highs, the SaaS sector has been battered, with investor confidence declining in 2026 due to growing fears that artificial intelligence will disrupt SaaS businesses, leading to significant stock price declines for many companies.
- Revenue Growth Potential: ServiceNow's subscription revenue climbed 21% year-over-year in Q4 2025, with a projected growth of 21.5% for Q1 2026, indicating strong growth potential in a competitive market, particularly driven by advancements in AI technology.
- Innovation-Driven Growth: The launch of ServiceNow's Now Assist generative AI solution has become a major growth driver, while the new AI Control Tower platform will further enhance its capabilities in managing AI agents, improving client workflow efficiency and security.
- Valuation Attractiveness: Despite the overall decline in SaaS market valuations, ServiceNow's forward price-to-sales ratio stands at 7, with a price-to-earnings ratio slightly above 25.5, suggesting that the company is likely to achieve higher market recognition and investment returns in the future, especially with the support of AI technology.
See More
Accenture Mandates AI Tool Usage for Leadership Promotions
- Promotion Requirements: Accenture has informed senior staff that regular use of AI tools is a prerequisite for leadership promotions, aiming to enhance the company's competitiveness in the AI sector and ensure employee skills align with market demands.
- Employee Reskilling Initiative: CEO Julie Sweet stated that 550,000 employees have been reskilled in generative AI fundamentals, highlighting the company's commitment to skill enhancement and laying the groundwork for future business transformation.
- Global Employee Impact: While the policy applies to most employees, those in 12 European countries and the division handling U.S. government contracts are exempt, reflecting the company's flexibility and adaptability on a global scale.
- Strategic Partnerships: Accenture has recently partnered with companies like OpenAI and Anthropic to provide AI tool training for tens of thousands of employees, further solidifying its leadership position in AI technology application.
See More
Valuation Challenges Intensify for Tech Stocks
- Tech Stock Sell-off: A wave of selling in technology shares is occurring as investors express uncertainty about their future value, particularly as price-to-earnings ratios shrink dramatically, which negatively impacts overall investment sentiment.
- Danaher-Masimo Acquisition Risks: Danaher is acquiring Masimo at nearly 25 times next year's earnings, despite the latter's inability to justify its multiple over the years, raising concerns that could adversely affect Danaher's stock performance.
- CrowdStrike-Microsoft Partnership: CrowdStrike's Falcon platform is now available on the Microsoft Marketplace, which could significantly boost revenue; however, its current P/E ratio of 85 has led to a tepid market reaction, reflecting investor anxiety over high valuations.
- ServiceNow Management Confidence Issues: Despite ServiceNow's announcement of a $5 billion stock buyback and intentions from executives to buy shares, the stock price still fell, indicating market skepticism about its growth prospects amid intensifying AI competition.
See More
Shift in SaaS Business Models Amid AI Disruption
- Shift in SaaS Models: Zavery highlighted that the SaaS business model is transitioning from merely increasing user seats to offering AI-driven platforms that automate work, warning that companies failing to adopt the latest technology risk obsolescence.
- Market Pressure on Software Stocks: Amid rising fears of AI disruption, software stocks have faced broad selloff, with the Nasdaq 100 index declining 1.4% since the start of the year, indicating a pessimistic sentiment towards tech stocks.
- Software Darwinism: Zavery referred to the current market dynamics as 'software Darwinism,' suggesting that companies unable to transition to AI platforms will be forced out of the market, reflecting intensified competition within the industry.
- Optimistic Outlook for ServiceNow: Despite ServiceNow's shares being down about 30% year-to-date, Zavery remains optimistic, suggesting that the ongoing market upheaval could serve as a tailwind for the company, indicating potential opportunities amidst the disruption.
See More
Microsoft Board Member Buys $2 Million in Stock Amid Bearish Sentiment
- Insider Buying Signal: Microsoft board member John Stanton purchased 5,000 shares at $397.35 each on Wednesday, totaling nearly $2 million, which may provide reassurance to investors amid pressures from AI-related capital spending concerns.
- Poor Market Performance: Microsoft stock has declined over 17% year-to-date, making it the worst performer among the Magnificent Seven, reflecting ongoing investor fears that AI tools could diminish software demand and negatively impact business models.
- Capital Expenditure Plans: Microsoft announced a 70% increase in capital expenditures to $110 billion, raising investor concerns about future profitability, particularly as tech stocks face significant pressure.
- Retail Sentiment Analysis: Despite Stanton's purchase being perceived as a bullish signal, retail sentiment on Stocktwits remains in the 'bearish' zone, indicating cautious investor attitudes towards Microsoft's future performance.
See More
Analysis of the Reasons Behind Software Stock Pullback
- Market Sentiment Shift: In 2025, Palantir Technologies has seen its stock price drop about 22%, while Adobe, Salesforce, and ServiceNow have all slid between 25% and 30%, indicating increasing investor concerns about software stocks despite strong performance reports from these companies.
- Valuation Risk Emergence: With the S&P 500 climbing 78% from 2023 to 2025, many software stocks have run ahead of their underlying fundamentals, leading to a market reassessment of these high-valuation stocks, which could further depress prices.
- Misunderstanding of AI Impact: While AI is viewed as a potential disruptive force, analysis suggests that its application is actually helping incumbents enhance their competitive advantages rather than simply threatening their market positions, indicating that market fears regarding AI may be misguided.
- Long-Term Growth Potential: Despite Palantir's stock price decline year-to-date, it has risen over 80% since the beginning of 2025, reflecting strong revenue growth and profitability, suggesting market recognition of its long-term growth potential.
See More
