ServiceNow (NOW) shares rallied sharply on Monday, jumping 8.5% to $134.95 in heavy trading volume, as Wall Street staged a broad rotation back into enterprise software stocks. The move came after Nvidia (NVDA) CEO Jensen Huang dismissed fears that AI agents would replace software companies, calling the notion 'exactly the opposite.'
Broad Software Rally
The positive sentiment extended beyond ServiceNow, with Salesforce (CRM) surging 9.5%, IBM (IBM) gaining 8.9%, and Adobe (ADBE) advancing 4.3%. The iShares Expanded Tech-Software Sector ETF (IGV) climbed 3.6%, indicating the rally was sector-wide rather than company-specific. Investors had been cutting software positions for much of the year on concerns that AI agents could reduce demand for traditional software tools.
ServiceNow's AI Pivot
ServiceNow has positioned itself as a critical control layer for AI within enterprises. In its first-quarter earnings report, the company posted subscription revenue of $3.67 billion, up 22% year-over-year. Notably, the number of customers spending over $1 million annually on Now Assist surged more than 130%. CEO Bill McDermott stated that the company's 'AI growth is far exceeding even our own expectations.' Remaining performance obligations, a key metric for future revenue, rose 22.5% to $12.64 billion.
Market Context
Bank of America recently added ServiceNow back to its buy list, with analyst Tal Liani setting a $130 price target. Liani noted that 'AI increases the need for governance,' and that ServiceNow sits at the center of workflow control. Despite Monday's gains, the stock remains down nearly 19% for the year, after a 42% decline earlier in 2026. The rally reflects a bet that AI agents will increase demand for governance and workflow tools rather than displace them.
Risks and Outlook
ServiceNow has flagged several risks, including competition, customer adoption of AI, macroeconomic factors, and foreign exchange fluctuations. If AI agents reduce the need for seat-based software faster than they boost demand for governance tools, revenue growth could disappoint. The broader market also provided a tailwind, with major indexes near record levels. Traders are now focused on upcoming U.S. jobs data and Broadcom (AVGO) earnings later this week.
ServiceNow's stock is no longer behaving like a typical defensive subscription software name. Instead, it is trading as a high-conviction AI operating layer bet for large enterprises. The key question remains whether customers will continue to sign contracts based on that narrative.
