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Artificial intelligence (AI) is currently captivating the investment community. Apart from the ‘Magnificent Seven’ stock, investors are also exploring other opportunities that could yield lucrative returns as well. But with so many tech industry executives touting the term “AI” on earnings calls and media interviews, it’s hard to tell which companies are actually emerging as leaders in the field. There are cases where
ServiceNow (New York Stock Exchange: Current) It is a name that is not well known in the AI business. The company specializes in automation solutions for information technology (IT) services and is quietly building a cutting-edge AI infrastructure. An analysis of the company’s stock relative to its peers suggests that now is a great time to buy.
Leading the digital transformation revolution
ServiceNow is led by Bill McDermott, a former CEO of an enterprise software provider. SAP. Since he took the helm of ServiceNow in 2019, McDermott has consistently used one specific phrase: digital transformation to describe the company’s disruptive agenda. But what exactly does that mean?
Businesses rely on more data than ever before to make informed and efficient decisions. Additionally, large companies tend to use a combination of different software tools and platforms to store their data. These systems often cannot easily communicate with each other, putting decision makers in a difficult situation.
ServiceNow helps businesses digitize their operations and connect their data.
ServiceNow is hosting a sales masterclass
The chart below shows how ServiceNow has consistently grown the number of customers paying at least $1 million in annual commitments. These customers have also increased their spending with ServiceNow over the years, showing that they love the company’s suite of products.
One of the ways ServiceNow has been able to achieve this growth is through newly developed AI-powered solutions. For example, in the fourth quarter, ServiceNow’s Generated AI products contributed the largest net new annual contract value of any new product.The company boasts global accounting firm EY and payments leader visa It is cited as a prominent customer of AI tools.
Should you buy ServiceNow stock now?
AI has various application areas. It’s important to analyze trends in your IT spending as it relates to ServiceNow. At the company’s fourth-quarter earnings conference in late January, McDermott said:
gartner predicts that technology spending will reach $5 trillion in 2024 and increase to $6.5 trillion by 2027. That means spending will increase by another $1 trillion in just two years, an acceleration from the more than 10 years it took him to reach $5 trillion. In 2024, for the first time in this decade, IT services will be bigger than communications services. Gartner predicts that by 2027, nearly all of the growth in global IT spending will come from software and IT services.
McDermott emphasized that while overall technology spending is expected to increase, software and IT services in particular are expected to be big beneficiaries sooner rather than later. Looking at it another way, while ServiceNow is successfully growing its enterprise customers, its best days may be yet to come.
ServiceNow has a price-to-sales ratio of 18, which ranks in the middle among leading enterprise software development companies specializing in workplace automation services.
ServiceNow could very well be an undervalued growth stock, overshadowed by its larger competitors. Don’t get me wrong. McDermott and his team are now laying the foundation at the intersection of generative AI and IT software, allowing ServiceNow to benefit from the tailwinds of his increased IT spending over the next few years.
To me, ServiceNow represents a unique opportunity in the AI industry. While the company may not have garnered as much attention as other large software providers, trends in its customer base and the overall evolution of its overall target market combine to create an attractive investment opportunity.
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Adam Spatacco holds a position at Palantir Technologies. The Motley Fool has positions in and recommends Atlassian, Datadog, MongoDB, Palantir Technologies, ServiceNow, Snowflake, Visa, and Workday. The Motley Fool recommends his Gartner. The Motley Fool has a disclosure policy.
1 Unstoppable Artificial Intelligence (AI) Stocks to Buy Hand Over Fist in 2024 Originally published by The Motley Fool
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