ServiceNow (NOW) Stock Downgraded on Structural AI Concerns, KeyBanc Says

Core Viewpoint - ServiceNow, Inc. has been downgraded to Underweight by KeyBanc due to concerns over disruption risks related to artificial intelligence, valuation, and growth momentum as the enterprise software sector approaches 2026 [1][2] Group 1: Downgrade and Market Position - KeyBanc's downgrade reflects significant concerns about ServiceNow's future performance amidst competitive pressures and structural challenges in the IT sector [1][2] - Analyst Jackson Ader emphasized that the downgrade is not merely narrative but based on observable trends in IT back-office employment data, which could increase risks for ServiceNow in the near future [2] Group 2: AI Products and Competitive Landscape - ServiceNow offers AI products with a hybrid monetization structure that may help mitigate some challenges, but similar strategies have not been effective for other SaaS sectors facing similar pressures [3] - KeyBanc suggests that ServiceNow's leadership in AI orchestration may be threatened by competitors like Microsoft by 2026 [3] Group 3: Financial and Strategic Considerations - The company is increasing its inorganic investments, which adds to the uncertainty surrounding its future performance, despite not having an exorbitant valuation [4] - While ServiceNow has potential as an investment, analysts believe there are other AI stocks with greater upside potential and lower downside risk [5]