Adam Spatacco, The Motley Fool
5 min read
In This Article:
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While shares of Palantir continue to crush the market, another AI software stock, ServiceNow, has underperformed so far this year.
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Shares of ServiceNow have climbed considerably over the last year, and its $1,000 stock price may be turning investors away -- making now an interesting time for management to consider a stock split.
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ServiceNow is also benefitting from strong AI tailwinds, and the company's premium valuation appears warranted.
As of closing bell on June 6, shares of enterprise software darling Palantir Technologies have gained 69% on the year, making it the top-performing stock in the Nasdaq-100 index.
While Palantir appears to be on an unstoppable run, smart investors understand that there are other opportunities at the intersection of artificial intelligence (AI) and software.
One AI software company that has become overshadowed by Palantir's rise is ServiceNow (NYSE: NOW), a provider of various cloud-based workplace management solutions and solutions for information technology (IT) professionals.
With a share price of over $1,000 as of this writing, ServiceNow is a potential candidate for a stock split in the near future.
Let's talk about why that is, and whether the stock is a good buy right now.
From time to time, a company may choose to split its stock, increasing its share count while decreasing its share price in proportion. In a 10-for-1 stock split, the company's share price decreases by a factor of 10 while its outstanding shares rise tenfold. Therefore the market cap remains unchanged.
Over the last 12 months, ServiceNow's stock price has climbed by 46%, dwarfing the 12% and 14% gains of the S&P 500 and Nasdaq Composite indexes, respectively.
Unfortunately, 2025 has been a different story so far. As of the closing bell on June 6, shares of ServiceNow are down by 3% on the year. Admittedly, this is a little peculiar, as software-as-a-service (SaaS) businesses are relatively insulated from tariffs, which have been the biggest drain on the stock market this year.
ServiceNow may have underperformed this year in part because of analyst suspicions that the company's public sector business could be at risk from the budget-cutting government project known as the Department of Government Efficiency (DOGE).
If investors have been panic-selling ServiceNow over DOGE concerns, it's ironic, because Palantir -- which derives more than half of its revenue from government contracts -- hasn't witnessed a similar dynamic.
