ServiceNow Inc. advanced 2.5% to close at $106.48 on Tuesday, spearheading a rebound across the software sector following a sharp downturn linked to concerns about artificial intelligence disruption. The stock held steady in after-hours trading as investors assessed whether the recovery could extend into Wednesday's session.
Major Wall Street firms pushed back against the narrative driving the selloff. JPMorgan strategists, led by Dubravko Lakos-Bujas, noted the market appears to be pricing in worst-case AI disruption scenarios that are unlikely to materialize over the next three to six months. Morgan Stanley analyst Katy Huberty echoed this view, describing the valuation gap as "sentiment-driven, not fundamental."
JPMorgan specifically identified ServiceNow as one of several "AI-resilient" software stocks, a list that also includes Microsoft, Palo Alto Networks, CrowdStrike, and Datadog. This designation suggests the bank believes these companies possess business models that can withstand potential competitive shifts from emerging AI technologies.
The trading session remained volatile, with the S&P 500 software and services index experiencing significant intraday swings before paring losses. The index's movement reflected persistent investor anxiety about how quickly AI-powered agents might integrate into various software layers.
Not all analysts are convinced the worst is over. UBS downgraded its rating on the U.S. information technology sector to "Neutral," warning that worries over software spending and capital expenditures could resurface despite lower valuations. The firm highlighted the risk that renewed AI disruption talk or signs of corporate belt-tightening could quickly pressure high-multiple software stocks.
Market participants are now monitoring whether ServiceNow can maintain its position above Monday's closing level. Attention is also focused on the broader software index's ability to build on Tuesday's gains. Beyond daily price action, investors are looking ahead to ServiceNow's annual Knowledge conference scheduled for May 5-7 in Las Vegas, where product announcements and strategic updates could influence market sentiment.
