The Impact of Software Concerns on Private Credit and Recommended BDC Stocks to Consider
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Feb 06 2026
0mins
Source: Barron's
- Private Credit Sector: The emergence of private credit "cockroaches" indicates a shift in the market, particularly affecting the software sector.
- Investment Opportunities: This situation may present new investment opportunities in shares of business development companies that hold the debt of these affected companies.
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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: 104.650
Low
172.00
Averages
222.81
High
263.00
Current: 104.650
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.
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- Market Panic Intensifies: The software sector is experiencing a massive sell-off this week, with shares of Salesforce and ServiceNow dropping about 6% on Tuesday, while Microsoft fell approximately 3%, reflecting growing investor concerns that AI may disrupt traditional software licensing models.
- Surge in AI Demand: Salesforce's AI-driven platform Agentforce saw its annual recurring revenue skyrocket 169% year-over-year to $800 million in fiscal Q4, indicating strong enterprise customer demand for new AI features, although they still represent a small portion of overall revenue.
- Cost Pressure Emerges: Despite Meta's fourth-quarter revenue rising 24% year-over-year, its earnings per share only increased by 11%, highlighting the profit compression challenges companies face when expanding AI capabilities in the AI-first era, which could impact software firms' profitability.
- Integration Challenges: Organizations face a prolonged learning and integration curve when implementing AI technologies; while marketing pitches sound promising, practical deployment may lead to more issues, slowing down the sales cycle for premium AI add-ons.
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Software Sector Faces Pressure from AI Transition
- Market Panic Intensifies: The software sector has experienced a significant pullback this week, with shares of Salesforce and ServiceNow dropping approximately 6% and 3% on Tuesday, respectively, reflecting investor concerns over new automation tools potentially replacing traditional software licensing models, leading to widespread market panic.
- Surge in AI Feature Demand: While Salesforce's AI-driven platform Agentforce saw a staggering 169% year-over-year increase in annual recurring revenue to $800 million in fiscal Q4, AI features still represent a very small fraction of overall revenue, indicating pressure on profitability during this transition phase.
- Rising Cost Risks: As enterprise customers continue to demand AI features, the infrastructure costs required to support these features may rise rapidly; Meta's situation illustrates that even with revenue growth, operating margins can be compressed due to escalating costs, highlighting the profitability challenges faced across the industry.
- Implementation Challenges Emerge: Companies deploying AI agents may encounter prolonged learning and integration curves; while marketing pitches sound appealing, practical implementation requires extensive training and data orchestration, and if early adopters face significant issues, the sales cycle for these premium AI add-ons will inevitably slow down, further intensifying competitive pressures for software providers.
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- Oil Price Fluctuations: WTI crude oil prices surged over 4%, reaching elevated levels due to Iran's missile and drone strikes on Israel and US bases, raising fears about energy supply disruptions that could impact global economic recovery.
- Economic Data: Despite market pressures, Q4 nonfarm productivity remained at 1.8%, while unit labor costs were revised up to 4.4%, exceeding expectations, indicating resilience in the economic fundamentals that may provide some support to the stock market.
- International Tensions: Reports of Saudi Arabia and the UAE aligning with the Iran conflict have heightened market anxiety, as investors are closely monitoring the potential for increased US military deployment, which could escalate tensions and affect global market stability.
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- Increase in Individual Stocks: Despite the overall decline, UiPath experienced a 4 percentage point rise in short interest over the past month, reaching 26.2%, pushing its stock into what S3 refers to as 'battleground' territory, highlighting ongoing investor scrutiny.
- Cautious Market Sentiment: Concerns about AI competitors and automation tools potentially undermining traditional software demand have intensified, prompting a reevaluation of long-term revenue potential for software licenses and workflows, thereby affecting market sentiment.
- Selective Investment Strategy: As aggregate sector positioning stabilizes, investors are increasingly focusing on specific companies like Sprinklr, Dropbox, and Workday, which have seen notable increases in short interest over the past month, reflecting a heightened awareness of perceived vulnerabilities.
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Investment Insights: The article likely discusses current trends and strategies in global equities, reflecting Kirkham's perspective on market dynamics.
Market Analysis: It may provide an analysis of economic indicators and their impact on investment decisions, emphasizing the importance of informed choices.
Future Outlook: The content could also explore predictions for market movements and investment opportunities, guiding readers on potential future trends.
See More
US Stocks Decline Amid Ongoing Iran Conflict
- Market Movement: The S&P 500 Index is down 0.16%, while the Dow Jones Industrial Average is up 0.13%, and the Nasdaq 100 Index has decreased by 0.50%, reflecting investor concerns over the ongoing Iran conflict, which is dampening market sentiment.
- Rising Energy Prices: WTI crude oil prices have surged over 4% due to Iran's missile strikes on Israel and US bases, which not only limits stock market declines but also raises inflation expectations, potentially influencing future monetary policy decisions.
- Economic Data Performance: The US Q4 nonfarm productivity remained unchanged at 1.8%, while unit labor costs were revised up to 4.4% from 2.8%, exceeding market expectations, indicating economic resilience that may support the stock market.
- International Tensions Impact: Saudi Arabia and the UAE have taken steps toward joining the Iran war, potentially escalating the conflict, which increases market concerns about future geopolitical risks and drives investors towards safer assets.
See More
Software Sector Faces AI Transition Challenges
- Market Panic Intensifies: The software sector is experiencing a massive sell-off this week, with shares of Salesforce and ServiceNow dropping about 6% on Tuesday, while Microsoft fell approximately 3%, reflecting growing investor concerns that AI may disrupt traditional software licensing models.
- Surge in AI Demand: Salesforce's AI-driven platform Agentforce saw its annual recurring revenue skyrocket 169% year-over-year to $800 million in fiscal Q4, indicating strong enterprise customer demand for new AI features, although they still represent a small portion of overall revenue.
- Cost Pressure Emerges: Despite Meta's fourth-quarter revenue rising 24% year-over-year, its earnings per share only increased by 11%, highlighting the profit compression challenges companies face when expanding AI capabilities in the AI-first era, which could impact software firms' profitability.
- Integration Challenges: Organizations face a prolonged learning and integration curve when implementing AI technologies; while marketing pitches sound promising, practical deployment may lead to more issues, slowing down the sales cycle for premium AI add-ons.
See More
Software Sector Faces Pressure from AI Transition
- Market Panic Intensifies: The software sector has experienced a significant pullback this week, with shares of Salesforce and ServiceNow dropping approximately 6% and 3% on Tuesday, respectively, reflecting investor concerns over new automation tools potentially replacing traditional software licensing models, leading to widespread market panic.
- Surge in AI Feature Demand: While Salesforce's AI-driven platform Agentforce saw a staggering 169% year-over-year increase in annual recurring revenue to $800 million in fiscal Q4, AI features still represent a very small fraction of overall revenue, indicating pressure on profitability during this transition phase.
- Rising Cost Risks: As enterprise customers continue to demand AI features, the infrastructure costs required to support these features may rise rapidly; Meta's situation illustrates that even with revenue growth, operating margins can be compressed due to escalating costs, highlighting the profitability challenges faced across the industry.
- Implementation Challenges Emerge: Companies deploying AI agents may encounter prolonged learning and integration curves; while marketing pitches sound appealing, practical implementation requires extensive training and data orchestration, and if early adopters face significant issues, the sales cycle for these premium AI add-ons will inevitably slow down, further intensifying competitive pressures for software providers.
See More
US Stocks Decline Amid Ongoing Iran Conflict
- Market Performance: On Tuesday, the S&P 500 Index fell by 0.37%, the Dow Jones Industrial Average decreased by 0.18%, and the Nasdaq 100 Index dropped by 0.77%, reflecting investor concerns over the ongoing conflict in Iran and a general decline in market sentiment.
- Oil Price Fluctuations: WTI crude oil prices surged over 4%, reaching elevated levels due to Iran's missile and drone strikes on Israel and US bases, raising fears about energy supply disruptions that could impact global economic recovery.
- Economic Data: Despite market pressures, Q4 nonfarm productivity remained at 1.8%, while unit labor costs were revised up to 4.4%, exceeding expectations, indicating resilience in the economic fundamentals that may provide some support to the stock market.
- International Tensions: Reports of Saudi Arabia and the UAE aligning with the Iran conflict have heightened market anxiety, as investors are closely monitoring the potential for increased US military deployment, which could escalate tensions and affect global market stability.
See More
Short Sellers Adjust Their Stance on Software Sector
- Decline in Short Interest: According to S3 Partners, short interest in the S&P 1500 Software Index has decreased after peaking on February 26, indicating a reduction in bearish sentiment following a 23% year-to-date decline in the sector.
- Increase in Individual Stocks: Despite the overall decline, UiPath experienced a 4 percentage point rise in short interest over the past month, reaching 26.2%, pushing its stock into what S3 refers to as 'battleground' territory, highlighting ongoing investor scrutiny.
- Cautious Market Sentiment: Concerns about AI competitors and automation tools potentially undermining traditional software demand have intensified, prompting a reevaluation of long-term revenue potential for software licenses and workflows, thereby affecting market sentiment.
- Selective Investment Strategy: As aggregate sector positioning stabilizes, investors are increasingly focusing on specific companies like Sprinklr, Dropbox, and Workday, which have seen notable increases in short interest over the past month, reflecting a heightened awareness of perceived vulnerabilities.
See More
Software Stocks Are Declining Once More: Reasons 'HALO' Companies May Not Be a Superior Investment.
Author Background: Seth Kirkham serves as the chief investment officer at Galvanize Global Equities, bringing expertise in investment strategies.
Investment Insights: The article likely discusses current trends and strategies in global equities, reflecting Kirkham's perspective on market dynamics.
Market Analysis: It may provide an analysis of economic indicators and their impact on investment decisions, emphasizing the importance of informed choices.
Future Outlook: The content could also explore predictions for market movements and investment opportunities, guiding readers on potential future trends.
See More
US Stocks Decline Amid Ongoing Iran Conflict
- Market Movement: The S&P 500 Index is down 0.16%, while the Dow Jones Industrial Average is up 0.13%, and the Nasdaq 100 Index has decreased by 0.50%, reflecting investor concerns over the ongoing Iran conflict, which is dampening market sentiment.
- Rising Energy Prices: WTI crude oil prices have surged over 4% due to Iran's missile strikes on Israel and US bases, which not only limits stock market declines but also raises inflation expectations, potentially influencing future monetary policy decisions.
- Economic Data Performance: The US Q4 nonfarm productivity remained unchanged at 1.8%, while unit labor costs were revised up to 4.4% from 2.8%, exceeding market expectations, indicating economic resilience that may support the stock market.
- International Tensions Impact: Saudi Arabia and the UAE have taken steps toward joining the Iran war, potentially escalating the conflict, which increases market concerns about future geopolitical risks and drives investors towards safer assets.
See More
