ServiceNow (NOW) Stock Downgraded on Structural AI Concerns, KeyBanc Says

ServiceNow, Inc. (NYSE:NOW) is one of the Buzzing AI Stocks on Wall Street. On December 15, KeyBanc downgraded ServiceNow to Underweight, flagging disruption risks around artificial intelligence, valuation and growth momentum as the enterprise software sector heads into 2026.

While near-term strengths do exist for NOW, they are being outweighed by structural and competitive headwinds. The firm holds a $775 price target on the stock.

Analyst Jackson Ader noted in the firm’s Enterprise Software 2026 stock outlook that the “biggest change and the stock for which we expect to receive the most pushback is our downgrade of ServiceNow to Underweight,” which is “more than a narrative call.”

Ader highlighted “worrying trends in IT back-office employment data,” increasing the risk that the company becomes “at-risk-from-AI” in the coming quarters. While the company does offer AI products that could mitigate some of the headwinds, the firm is not much hopeful.

“ServiceNow’s own AI products include a hybrid monetization structure that should mitigate some of the headwinds that would come from seat-count pressure, but this has not kept other SaaS sub-sectors afloat when this narrative has come for them.”

Keybanc also believes that NOW’s position as an AI orchestration winner “may cede ground to Microsoft in 2026.” Meanwhile, government spending scrutiny as well as increased inorganic investment add to the uncertainty.

“Plus, other than Adobe, the rest of our enterprise coverage is accelerating, plus NOW is spending more inorganically than it ever has, plus valuation is not exorbitant but still a premium.”

ServiceNow, Inc. (NYSE:NOW) provides a platform that integrates workflows, data, and AI to coordinate how work flows across large organizations.

While we acknowledge the potential of NOW as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

READ NEXT: 10 Trending AI Stocks on Wall Street and 11 AI Stocks Analysts Are Watching Closely.

Disclosure: None.