Why ServiceNow Stock Gained 9.9%on Friday
Key Points
ServiceNow shares surged after announcing an expanded partnership with Google and HCLTech.
The stock is benefiting from a broader rotation back into software as fears that general-use AI models like ChatGPT would replace specialized SaaS companies have eased.
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ServiceNow (NYSE: NOW) gained 9.9% on Friday despite both the S&P 500 and the Nasdaq Composite finishing in the red.
Shares of the AI software-as-a-service (SaaS) operator got a lift from the announcement of an expanded partnership with HCLTech and Alphabet's Google, as well as a broader bounce in software stocks.
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ServiceNow expands its AI partnership with Google and HCLTech
On June 25, HCLTech -- the Indian IT giant -- announced an expanded partnership with Alphabet's Google Cloud and ServiceNow to put AI "agents" -- software that carries out tasks on its own -- into service.
Why software stocks are bouncing back
High-priced software stocks have been hammered over the past year after investors jumped ship, believing general-use AI models like ChatGPT or Claude could soon replace the need for specific software from companies like ServiceNow.
Those fears have largely subsided, and after a massive run in AI infrastructure stocks, investors have been rotating back into software.
Source: Getty Images
Is ServiceNow stock a buy?
ServiceNow has announced a string of big AI partnerships recently with companies like IBM, Microsoft, and Nvidia. Its subscription revenue grew 22% last quarter, and the company raised its outlook.
I tend to agree that fears of AI eating software's lunch have been overblown, and while the stock isn't cheap, I think it's a buy at this price.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and ServiceNow. The Motley Fool has a disclosure policy.
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