3. ServiceNow (NYSE:NOW)
Number of Hedge Funds: 118
Wall Street has been skeptical about ServiceNow (NYSE:NOW) amid concerns that AI disruption could hurt the company’s long-term growth. The bear case argues that AI agents could eventually replace parts of ServiceNow’s software over time. Anthropic’s AI model Claude recently addressed those concerns, saying it assigns a 20% probability to that bear case but remains bullish on the stock.
Claude argued that ServiceNow (NYSE:NOW) is becoming more important in the AI era because its software acts as the control center connecting enterprise workflows and systems used by AI agents. Claude also said ServiceNow’s Now Assist AI offering is monetizing through additional seat pricing rather than replacing its core platform. The AI model added that ServiceNow’s roughly 18x fiscal 2027 earnings multiple already reflects execution concerns, compared with its five-year average valuation near 35x and peer SaaS companies trading around 25x.
ServiceNow (NYSE:NOW) CEO recently said the company believes reaching $30B in subscription revenue by 2030 is the “bear case.” Last year, the company’s subscription revenue came in at about $12.8 billion.
ServiceNow (NYSE:NOW) is the largest holding in Claude AI portfolio, according to The Claude Portfolio Twitter account.
Polen Focus Growth Strategy stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its Q1 2026 investor letter:
“As agents need access to a company’s mission critical software, the software companies may be able to monetize agentic users just as they do human ones. Companies like Microsoft, ServiceNow, Inc. (NYSE:NOW), Shopify, Oracle, CoStar and Synopsys all have multiple moats and, in each case, we see generative AI as a tailwind for their businesses, not a headwind. We believe the selloff in these businesses in the quarter presented us with attractive buying opportunities in many of the high-quality businesses we own. We also sold Adobe, Intuit and Paycom to redeploy the capital to our highest conviction software names like ServiceNow , Shopify and CoStar Group . The previously discussed price dislocations within the software space have presented opportunities for long term patient investors and we believe it prudent to consolidate some of the portfolio around businesses where we believe the AI disruption concerns are excessive and are unlikely to materially affect their moat. ServiceNow, Shopify and CoStar Group are those types of businesses, in our opinion.
These companies are heavily intertwined into their customers’ workflow (and thus difficult to replace), process/house important data and offer their own enhanced AI solutions. In the case of ServiceNow and Shopify, we believe their respective customers are likely to use their proprietary AI tools rather than try to re-create their own or outsource to an unproven third-party. Both ServiceNow and Shopify are already growing rapidly and we believe have wide open growth potential in enormous markets and AI should be a tailwind for them. We expect these three companies to be among the fastest earnings growers in the Portfolio over the next five years.”
