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Luke Kawa

ServiceNow CEO on the stock’s swoon: “You can give us back the market cap”

Investors have taken billions in market cap away from ServiceNow, and CEO Bill McDermott would very much like for it to be returned.

During the conference call that followed Q4 earnings on Wednesday, McDermott tried to reassure investors that the company’s recent M&A efforts weren’t made to latch onto lines going up in hopes of distracting from any looming deterioration in its core business:

“I wanted to make it very clear to the investors, I hear you, and we did not and never have bought an asset like many others have — and I know that’s probably why it’s on your mind — because we needed the revenue. What we needed is the innovation and the expanded growth opportunity of a great TAM [total addressable market] and a customer base that’s waiting for us. And as it relates to future M&A, we do not have a large scale M&A on the road map...

So, probably it was a little bit what’s going on over there at ServiceNow, and I noticed that we lost about $10 billion in market cap on that because of the worry. So now the worry is gone, you can give us back the market cap. And no, we’re not going after anything large. We now have them in the family and we’re going to grow them like we do everything else.”

McDermott attributed the downdraft in ServiceNow to its recent acquisitiveness. And it’s true that the stock did tumble upon reports that the company was acquiring cybersecurity firm Armis (which came on the heels of its Veza acquisition), then dipped again when the deal was announced at an even higher price than previously rumored.

Interestingly, McDermott was actually understating the pain on the call, or at least has a very generous return policy: the stock shed nearly $21 billion in market cap on December 15, the session it got dumped following reports around the potential Armis acquisition.

NOW has fallen more than twice as much as the iShares Expanded Tech Software ETF since December 12 through Wednesday’s close. More broadly, the software cohort has been branded with the equivalent of a scarlet letter by traders as of late, amid concerns that it’ll be disintermediated by AI tools and agents. In particular, Claude Code’s development of Cowork has been hailed as a “ChatGPT moment repeated” that threatens to disrupt large swaths of the industry.

Wedbush Securities analyst Dan Ives removed ServiceNow from his list of top 30 AI stocks at the start of December, saying that its AI monetization has been slower than anticipated so far.

ServiceNow is lower in premarket trading despite reporting top- and bottom-line Q4 beats in results that were broadly applauded by the analyst community, along with better-than-expected Q1 guidance.

That’ll be even more market cap that McDermott will likely want back.

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Constellation, Talen, and NRG surge as BNP analysts see “golden (AI)ge” ahead for them

Power producers Talen Energy, Constellation Energy, and NRG jumped Wednesday, benefiting in part from a rosy write-up by analysts at BNP Paribas, who launched coverage of all three at “outperform” and argued that the AI energy trade — a big AI-related winner in recent years that has lagged a bit recently — is due for a second wind.

That view was in a broad note on the independent power producer segment of utilities industry that the analysts published Wednesday, titled “The Golden (AI)ge of IPPs.”

Here’s the gist of it:

US independent power producers (IPPs) have lagged the AI basket for 6+ months, after garnering much attention in 2023-1H25. Investors are caught up in the minutia of perceived headwinds: underwhelming pace of power purchase agreement deals, distributed behind-the-meter solutions stealing the ‘time-to-power’ edge, pressure for data centers to bring generation and not tighten the grid, etc.

And yet, as we demonstrate, despite all this noise, the wave of rising load is at the cusp of an acceleration that will nonetheless overwhelm new supply—well into the 2030s, in our view. Hop on or risk missing the resurgent AI trade this decade.

BNP’s price targets for the stocks — Constellation ($407), NRG ($232) and Talen ($549) — implied gains of 32%, 50%, and 68% respectively. (Though today’s gains would reduce those potential upside targets somewhat for new buyers.)

US independent power producers (IPPs) have lagged the AI basket for 6+ months, after garnering much attention in 2023-1H25. Investors are caught up in the minutia of perceived headwinds: underwhelming pace of power purchase agreement deals, distributed behind-the-meter solutions stealing the ‘time-to-power’ edge, pressure for data centers to bring generation and not tighten the grid, etc.

And yet, as we demonstrate, despite all this noise, the wave of rising load is at the cusp of an acceleration that will nonetheless overwhelm new supply—well into the 2030s, in our view. Hop on or risk missing the resurgent AI trade this decade.

BNP’s price targets for the stocks — Constellation ($407), NRG ($232) and Talen ($549) — implied gains of 32%, 50%, and 68% respectively. (Though today’s gains would reduce those potential upside targets somewhat for new buyers.)

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