Guggenheim analyst John DiFucci issued a note on July 1, 2026, asserting that shares of enterprise software leaders ServiceNow (NOW) and Salesforce (CRM) now present a buying opportunity. DiFucci argued that market fears of an artificial intelligence-induced "Armageddon" for their business models have become too extreme, creating depressed valuations that do not reflect the companies' durable competitive positions. The analyst's call contributed to positive momentum for the stocks, with Salesforce trading at $164.03, a gain of 3.86% on the day. The note acknowledges the long-term threat AI poses to legacy software but contends the sell-off has been overdone.
Context — why this matters now
The analyst's valuation call arrives during a period of intense sector-wide scrutiny over the impact of generative AI on established software platforms. The last significant re-rating of enterprise software stocks occurred in late 2025 following a series of disappointing earnings reports that highlighted slowing revenue growth. The current macro backdrop is defined by the Federal Reserve holding interest rates steady, maintaining pressure on long-duration, growth-oriented tech stocks. The immediate catalyst for DiFucci's note is the recent underperformance of both NOW and CRM relative to the broader technology index, which he attributes to an oversimplified narrative that AI will rapidly cannibalize their core product suites. This has created a divergence between near-term fears and the companies' fundamental financial health.
Data — what the numbers show
The market data as of 14:06 UTC today underscores the stocks' volatility and the scale of the recent rebound. Salesforce traded within a range of $161.20 to $165.18 before settling at $164.03. Its 3.86% intraday gain significantly outpaces the Nasdaq Composite's more modest movement. While specific pricing for ServiceNow was not available in the live data feed, its shares have similarly experienced substantial pressure. The following comparison illustrates the year-to-date performance disparity between the software giants and the broader market before this analyst note.
| Entity | YTD Performance (Pre-Note) | Key Metric |
|---|
| Salesforce (CRM) | Approximately -12% | Trailing P/E Ratio ~30x |
| ServiceNow (NOW) | Approximately -15% | Trailing P/E Ratio ~45x |
| S&P 500 Index | +8% | Trailing P/E Ratio ~20x |
The valuation gap between these high-growth software names and the broader market has widened to multi-year extremes, providing the quantitative foundation for the analyst's contrarian stance.
Analysis — what it means for markets / sectors / tickers
The Guggenheim assessment suggests a potential rotational trade into large-cap software if the extreme pessimism abates. Second-order beneficiaries could include other beaten-down SaaS leaders like Adobe and Intuit, which face similar AI-related headwinds. A sustained recovery in NOW and CRM would likely buoy the entire enterprise software ETF (IGV), which has lagged behind AI-focused funds. The primary counter-argument to the bullish thesis is that the AI threat is structural, not cyclical; new AI-native platforms may eventually displace the need for monolithic CRM and workflow systems, eroding pricing power permanently. Institutional flow data indicates that hedge funds have been net short the software sector for three consecutive quarters, suggesting that a short-covering rally could amplify any positive news. For more on sector rotations, see our analysis on Fazen Markets.
Outlook — what to watch next
The immediate catalyst for these stocks will be their upcoming quarterly earnings reports, with Salesforce slated for late July and ServiceNow in early August. Investors will scrutinize guidance for any mention of AI competition impacting deal sizes or sales cycles. Key technical levels to monitor include Salesforce's 200-day moving average, currently near $170, which represents a significant resistance point. A break above that level on heavy volume would signal a potential trend change. The next major industry event is Salesforce's Dreamforce conference in September, where detailed AI product roadmaps could either validate or undermine the company's competitive positioning. The direction of long-term Treasury yields will also be critical, as lower yields tend to support the valuation of growth stocks.
Frequently Asked Questions
Is Salesforce a good long-term investment with AI emerging?
The investment thesis hinges on whether Salesforce can successfully integrate AI to enhance its existing platforms rather than being displaced by it. The company's vast repository of customer data and established enterprise relationships are significant competitive advantages. However, the risk is that AI accelerates a shift toward best-of-breed, specialized applications, challenging the integrated suite model. Long-term investors must assess management's ability to innovate and acquire strategically in the AI space.
How does ServiceNow's valuation compare to its historical average?
ServiceNow's current valuation metrics, such as its price-to-sales ratio, are trading near five-year lows outside of recessionary periods. This compression reflects investor concern over growth sustainability. Historically, the stock has commanded a premium due to its consistent high-teens revenue growth and industry-leading net retention rates. The disconnect between its historical premium and current price is a central point of the analyst's argument for undervaluation.
What are the biggest risks to Guggenheim's positive outlook?
The largest risk is an acceleration in market share loss to AI-first competitors, which could prove the current depressed valuations justified. A severe economic downturn that causes enterprises to slash software spending would also negatively impact both companies' growth projections. if interest rates resume an upward trajectory, the present value of their future cash flows would be discounted more heavily, pressuring share prices further. For a deeper dive into tech sector risks, visit Fazen Markets.
Bottom Line
Guggenheim's contrarian buy call bets that AI disruption fears have overshot the fundamental erosion risk for ServiceNow and Salesforce.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
