ServiceNow Sell-Off Highlights Jittery Market

Talk about a jittery market. Shares of ServiceNow dropped 11.5% on Monday after a weekend report that the enterprise software firm was in “advanced talks” to buy cybersecurity firm Armis for $7 billion. The stock sell-off wiped $21 billion off ServiceNow’s market capitalization—reducing it to $159 billion—which seems something of an overreaction. But it’s a demonstration that nowadays investors are selling first and asking questions later. 

Investors have turned particularly negative towards the smaller cloud firms that are spending heavily to build capacity for servicing OpenAI and other AI developers. Shares of Oracle and CoreWeave both fell today, continuing a sell-off that started last week over fears about their exposure to a sector whose future remains uncertain. In the case of ServiceNow, the concern is slightly different, relating to the worries that AI will cannibalize companies selling subscription software to businesses. As KeyBanc analyst Jackson Ader said in a note on Sunday, there’s a risk that ServiceNow “gets brought into the at-risk-from-AI tent in the coming quarters.”