Why Morgan Stanley Turned Bullish on ServiceNow (NOW) Despite GenAI Risks

ServiceNow, Inc. (NYSE:NOW) is one of the AI Stocks in the Spotlight This WeekOn September 24, Morgan Stanley analyst Keith Weiss upgraded the stock from Equalweight to Overweight with a price target of $1,250.00 (from $1,040.00). The firm upgraded the enterprise software company, citing overblown risks.

The analysts noted how ServiceNow has been performing well despite having a volatile backdrop. The company delivered about 20% subscription growth, strong margins, solid cash flow, and also continues to invest in Generative AI.

Nevertheless, shares have lagged the broader market owing to concerns about government spending, tougher comparisons, and  longer-term risks GenAI innovation represents. Investors also seem cautious as they wait and watch whether agentic AI expands the market.

The firm believes that ServiceNow looks well-positioned with upside ahead stemming from Now Assist adoption, work flow integration, and new AI products.

“On the latter, investors have largely focused on the associated risks GenAI presents to seat-based models, as well as, the potential execution risks associated with management shifting the company’s business towards a hybrid pricing model. Beyond that, investors understandably continue to look for proof points agentic computing will be TAM expansive and as a leader in workflow automation, ServiceNow appears well-positioned to monetize this opportunity through 1) a Now Assist product cycle that is in earlier innings with potential for consumption-related benefits to materialize in 2026 and 2027, 2) a robust workflow data fabric that can connect multiple disparate data sources creating a unified system of engagement spanning IT, HR, Finance, Security, and Front Office workflows, and 3) a growing set of AI-related products such as AI Control Tower, providing a centralized solution for an enterprise’s AI ecosystem and highlighting ServiceNow’s focus on product innovation.”

ServiceNow, Inc. (NYSE:NOW) is a technology company that offers a cloud-based software platform for automating business workflows within an enterprise.

While we acknowledge the risk and potential of NOW as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NOW  and that has 10,000% upside potential, check out our report about this cheapest AI stock.

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Disclosure: None.