Software’s Little Wobble: A Bargain Hunter’s Guide

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The so-called S&P North American Technology Software Index, a collection of 111 companies engaged in the noble art of selling air – or, rather, code – has experienced a rather undignified tumble. Thirty percent down from its peak in September, they’re calling it a ‘bear market.’ A bear, mind you, is a creature known for its clumsiness and occasional grumbling. A fitting metaphor, wouldn’t you say? The root cause? Artificial Intelligence. It seems even the machines are developing a healthy skepticism towards overpriced software.

Investors, those eternally anxious souls, are fretting that these AI contraptions will diminish the demand for existing products. The panic began months ago, but truly blossomed when Anthropic unleashed ‘Cowork’ – a conversational assistant that promises to automate everything from sales pitches to legal loopholes. One imagines a world where accountants are replaced by algorithms, and lawyers by…well, slightly more sophisticated algorithms. A frightening prospect, naturally, for those who profit from complication.

Nvidia’s Jensen Huang, a man who clearly understands the value of a good sales pitch, has dismissed the whole affair as “the most illogical thing in the world.” He’s probably right, of course. Logic rarely plays a role in these speculative bubbles. But even Mr. Huang must concede that a little turbulence is good for separating the wheat from the chaff. And, as any seasoned bargain hunter knows, a little panic can create opportunities.

So, while the market wrings its hands, let’s consider a couple of companies that might just survive this ‘little wobble,’ as they say. Microsoft and ServiceNow. Not exactly revolutionary choices, perhaps, but then again, revolutions rarely end well for the shareholders.

Microsoft: A Fortress Built on Office Clips

Microsoft, that venerable institution, enjoys a remarkably strong position in the world of enterprise software. Office productivity, enterprise resource planning, business intelligence, and low-code development tools – they have a finger in every pie. And now, they’ve supercharged everything with generative AI assistants. Productivity, they claim, will soar. Paid Microsoft 365 Copilot seats rose 160% last quarter. A remarkable figure, though one wonders if it represents genuine efficiency or simply more elaborate procrastination.

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ServiceNow: The Bureaucracy Booster

ServiceNow, a market leader in IT asset management, operations management, and service management. In layman’s terms, they help companies manage their infrastructure, optimize performance, and improve user experience. Dan Romanoff at Morningstar points out that they achieved this dominance by automating workflows through a superior user interface. A superior user interface, naturally. The key to controlling people is to make the controls look appealing.

Gartner recently recognized ServiceNow as a leader in artificial intelligence applications for IT service management. Apparently, they’ve developed agentic AI – agents that can behave semi-autonomously. Their AI Agent Studio allows for the creation of supervised and autonomous agents with “transparent reasoning explanations.” Transparent reasoning explanations? A bold claim, considering the opacity of most corporate decision-making.

ServiceNow reported encouraging fourth-quarter results: revenue up 20% to $3.5 billion, operating margin expanded, earnings increased. CEO Bill McDermott declared that there is no AI company in the enterprise better positioned for sustainable, profitable revenue growth. A confident statement. One suspects Mr. McDermott understands the art of self-promotion.

Wall Street estimates ServiceNow’s earnings will increase 18% over the next year, compounding at 19% annually through 2027. At 29 times earnings, the valuation seems…reasonable. Down 52% from its record high? A golden opportunity. Analysts predict an 83% upside to $185 per share. A substantial return, wouldn’t you say? Perhaps enough to fund a small expedition to a tax haven.

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2026-02-10 11:54