While AI stocks in general have been extremely successful for shareholders, not all artificial intelligence (AI) companies are currently on the rise. ServiceNow (NYSE: NOW) The stock is trading down 51% from recent highs, and Palantir Technologies (NASDAQ: PLTR) is down 18% in the last 12 months.
Given these declines, some investors are probably wondering which AI stock is better to buy right now. Here’s what investors should know:
Did you miss Nvidia 2009? This rare signal flashes again. In 2009, a “double down” signal flashed for a little-known chip maker called Nvidia. For the first time in years, the same “Total Conviction” signal is flashing for a company one hundredth the size of Nvidia. Carry on”
Image source: The Motley Fool.
Table of Contents
The case for Palantir
Despite Palantir’s significant share price declines this year, the company reported some impressive results in its first quarter (ended March 31). Palantir’s revenue rose 85% to $1.6 billion, and adjusted non-GAAP earnings (adjusted) rose 154% to $0.33 per share. Both results significantly exceeded Wall Street consensus estimates.
Palantir also reported that total contract value is now $2.4 billion, up 61% from the year-ago quarter, and that the company has signed 72 contracts worth at least $5 million and 47 contracts worth at least $10 million.
Palantir is benefiting from the increasing need from businesses and governments to use AI-powered software to understand large amounts of data, and the company expects further growth. Management raised its 2026 revenue forecast to about $7.6 billion, representing 71% year-over-year growth from 2025.
The case for ServiceNow
Some investors fear that AI will replace ServiceNow’s core features, including workflow management and automation. Still, the company’s recently reported second-quarter results prove that some of these fears are overblown.
ServiceNow’s revenue rose 24% to nearly $4 billion in the second quarter (ended June 30), beating Wall Street’s consensus estimate of about $3.9 billion. The company’s non-GAAP adjusted earnings of $0.90 per share also beat consensus estimates of $0.86 per share and were up 11% from the year-ago quarter.
Growth from the company’s closely watched current remaining performance obligations (cRPO), which are contracts recognized as revenue over the next 12 months, rose 21% to $13.2 billion. Additionally, the company recorded 123 transactions with contract values exceeding $1 million, up 40% from the prior-year quarter.
Despite investor fears that AI will replace ServiceNow, the company’s management believes greater AI adoption will lead to additional growth as companies will need ServiceNow’s capabilities to manage their AI. After releasing second-quarter results, CEO Bill McDermott told CNBC: “There’s going to be more AI. There’s going to be more incidents, and all of those things are leading to increased volume at ServiceNow.”
McDermott added that the company raised its full-year forecast – which calls for subscription revenue to rise more than 23% to more than $15.8 billion – due to growing business volume driven by AI.
Verdict: ServiceNow is the better AI software stock
While Palantir’s revenue is growing rapidly and the company continues to add significant deals, its shares simply look way too expensive compared to ServiceNow.
Palantir currently has a price-to-earnings (P/E) ratio of around 140, compared to ServiceNow’s 60. For comparison, the average P/E ratio for the technology sector is currently 41.
ServiceNow’s recently released second-quarter results show that customers continue to choose the company’s automated services despite fears of AI disruption. That doesn’t mean ServiceNow isn’t without risks, but since its shares are significantly cheaper than Palantir’s, it appears to be the better AI software stock right now.
Should you buy shares in ServiceNow now?
Before you buy shares in ServiceNow, consider the following:
The colorful fool Stock Advisor The analyst team has just identified what they think this is The 10 best stocks so investors can buy it now… and ServiceNow wasn’t one of them. The ten stocks that made the cut are designed for long-term growth and could deliver huge returns in the years to come.
Think about when Netflix created this list on December 17, 2004… if you have $1,000 invested at the time of our recommendation, You would have $377,990!* Or when Nvidia created this list on April 15, 2005… if you have $1,000 invested at the time of our recommendation, You would have $1,269,518!*
This performance is why people listen. With a track record of beat the S&P 500 by four times, Stock Advisor offers a clear advantage. Don’t miss the latest top 10 list, available with Stock Advisorand join a long-term investor community.
See the 10 stocks »
*Stock Advisor returns from July 26, 2026.
Chris Snow does not hold a position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies and ServiceNow. The Motley Fool has one Disclosure Policy.
Better AI Software Stock: Palantir vs. ServiceNow was originally published by The Motley Fool
https://finance.yahoo.com/markets/stocks/articles/better-ai-software-stock-palantir-160700505.html
