A Guggenheim analyst says valuations for the two software stocks are too depressed, even though the AI threat is real

Guggenheim analyst John DiFucci upgraded shares of ServiceNow to buy from neutral on Wednesday.

Guggenheim analyst John DiFucci has been a firm believer that artificial intelligence is a "major threat" to software companies. But now he's saying that it's not a "death knell" for the sector, suggesting that some prominent software stocks may have been overly punished by investors.

DiFucci just turned bullish on two of this year's biggest software losers - ServiceNow and Salesforce, whose shares are down 33% and 38%, respectively, so far in 2026. The upgrades aren't exactly rousing endorsements of how those companies are positioned in the AI era but are rather expressive of DiFucci's view that the shares now look more attractive after their dramatic selloffs.

He lifted his rating on shares of ServiceNow (NOW) to buy from neutral on Wednesday, saying that the "well-run" company should benefit from U.S. government momentum.

According to DiFucci's conversations with management, ServiceNow's U.S. government trends are likely to improve following disruptions to federal spending related to the so-called Department of Government Efficiency, such as procurement delays and restructuring.

"We want to be clear that we are not upgrading shares because we see [ServiceNow] as an AI beneficiary," he wrote, adding that he believes AI monetization is "unlikely to materialize" for the company, and that the threat of artificial intelligence "does pose significant risks."

DiFucci also upgraded shares of Salesforce (CRM) to buy from neutral on Wednesday, saying that the "Armageddon scenario" currently priced into the stock is "misaligned with reality."

He believes shares of Salesforce, which are trading at a multiple of 3.7 times projected enterprise value to revenue for the next 12 months, to be "grossly undervalued."

Realistically, the company will "struggle to grow much, but does not decline much either," he said. "This is not a call that [Salesforce] will be a beneficiary of AI, but we don't believe it will decline as implied in the current valuation."

Shares of Salesforce and ServiceNow were up about 4% in premarket trading on Wednesday.

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-Hannah Pedone

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July 01, 2026 09:47 ET (13:47 GMT)

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