ServiceNow shares advanced 3.6% to $107.66 during Tuesday's trading session, leading a broader recovery in software equities. The workflow automation provider has been a focal point in a sector attempting to stabilize following last week's significant selloff.
AI Concerns and Sector Performance
Software stocks have faced substantial pressure amid fears that advancing artificial intelligence tools could disrupt traditional subscription business models. The software and services group has underperformed the S&P 500 by approximately 24 percentage points over the past three months. ServiceNow itself had declined more than 40% from the technology sector's peak in late October through early February.
Despite the rebound, volatility indicators remain elevated. Implied volatility for the iShares tech-software ETF stayed high, with short interest approaching record levels according to market data.
Retail Investors Step In
Retail traders have shown renewed interest, with net inflows into BlackRock's iShares Expanded Tech-Software ETF reaching a record $176 million on a one-month rolling basis. This occurred even as the S&P 500 software and services index remains down about 13% since late January, having erased nearly $1 trillion in market value during the week through last Thursday.
The software sector gained 2.9% on Monday, extending its recovery for a second consecutive session. "A little bit of good news can go a long way," noted Keith Lerner of Truist Advisory Services, describing technology and software stocks as "sharply oversold." Oracle shares also rose following an upgrade to "buy" from D.A. Davidson.
Broader Market Context
Wider markets showed mixed performance after U.S. retail sales data for December came in unexpectedly flat, suggesting potential economic slowing. Investors are monitoring upcoming economic releases and scheduled remarks from Federal Reserve officials Beth Hammack and Lorie Logan.
Within the sector, Datadog shares jumped after the company exceeded fourth-quarter estimates, though its full-year outlook fell below expectations. This mixed guidance highlights why investors remain sensitive to corporate updates.
Morgan Stanley analysts cautioned that software companies represent approximately $235 billion of the $1.5 trillion U.S. loan market, with significant exposure among lower-rated borrowers facing debt maturities in coming years. The bank expects continued price volatility but views a near-term spike in defaults as unlikely.
For ServiceNow specifically, the company recently projected annual subscription revenue above Wall Street expectations and authorized an additional $5 billion for share repurchases, alongside plans for a $2 billion accelerated buyback. "ServiceNow is growing both organically and by acquisition to expand its market opportunity," observed Rebecca Wettemann of Valoir.
The sustainability of Tuesday's recovery remains uncertain as investors balance strong demand for workflow automation against potential disruption from AI agents. Market participants now await key economic indicators, including the January employment report on Wednesday and January CPI data on Friday.
