NOW or CRM: Bank of America Chooses the Top Software Stock to Buy Right Now

AI has transformed large parts of the tech sector over the past year, though the impact has varied significantly from one industry group to another. Chipmakers, data center operators, and infrastructure providers have enjoyed enormous gains, while software stocks have faced a far more complicated reality as investors try to determine how generative AI could alter the economics of the SaaS industry.

The situation has become so pronounced that some on Wall Street have started referring to it as the “SaaSpocalypse” – a growing concern that AI tools could eventually reduce demand for parts of the traditional software industry. At the same time, others believe the rollout of enterprise AI adoption could take far longer and prove far more expensive than initially expected, potentially giving established software companies plenty of time to adapt.

The result has been substantial volatility as investors attempt to balance those competing views. The challenge now comes down to identifying which software companies can continue delivering growth while navigating a rapidly evolving environment.

Bank of America analyst Tal Liani is looking at two well-known names in software, ServiceNow (NYSE:NOW) and Salesforce (NYSE:CRM), and he’s choosing one as the top software stock to buy right now. Let’s take a closer look.

ServiceNow

First up on our list is ServiceNow, a cloud computing firm that focuses on the integration of business software and AI technology. The company provides a unified platform that brings together AI, business data, and workflows, making it possible to solve IT issues before they become problems. ServiceNow describes this as an ‘AI control tower,’ a way to reinvent business processes for today’s digital environment.

Getting down to actual operations, ServiceNow gives its users a range of products for ops management, IT and HR service delivery, automated workforce governance, agentic AI tech, data control, customer service management – in short, the full array of tools that businesses need to manage and oversee day-to-day operations. No matter what the task, it’s likely that ServiceNow can offer an AI or a system that can manage it.

Bringing AI into the mix of its workforce and data management tools was the game-changer for ServiceNow’s product offerings. The company has over 20 years of experience in the field, and its modern AI Platform is scalable, autonomous, and efficient. Better yet, for its customers, ServiceNow’s AI is not a unit of its own – it is AI with human oversight, keeping people in the loop.

Ironically, the same AI transition that ServiceNow is betting on has also become one of the main reasons behind the stock’s steep decline over the past year. As AI models and autonomous agents grow more capable, investors have started questioning whether parts of the traditional software industry could eventually become less essential, particularly in areas tied to workflow automation and enterprise productivity tools.

Looking at the recent financial report, we find that ServiceNow reported $3.77 billion in total revenue for 1Q26, a total that included $3.67 billion in subscription revenues. Both of these figures were up 22% year-over-year. The total revenue figure, $3.77 billion, was $24.22 million better than had been expected. At the bottom line, ServiceNow realized a non-GAAP diluted EPS of $0.97; this was up from $0.81 in the prior-year period and was in line with the forecasts.

Yet, ServiceNow shares tumbled following the report after the company lowered its operating margin outlook and warned that geopolitical tensions in the Middle East were delaying some enterprise deals, adding to concerns surrounding near-term growth.

Still, Bank of America’s Tal Liani is not losing confidence. The analyst believes ServiceNow remains well positioned to benefit from the long-term AI and enterprise software shift, arguing that the recent pullback does little to change the broader thesis.

“While AI is disrupting the software landscape, we think NOW stands to benefit from, rather than be replaced by, new AI solutions. The starting point is strong, with the company occupying a deeply embedded mission-critical position within enterprise workflows, serving as the system that governs, routes, approves, and audits activity across organizations, making the displacement costly and complex,” Liani explained.

This positive stance supports Liani’s Buy rating on the stock, while his $130 price target implies a one-year upside potential of ~28%. (To watch Liani’s track record, click here)

The Street is in broad agreement with this outlook, giving the stock a Strong Buy consensus rating based on 39 recent reviews that include 35 Buys and 4 Holds. The stock is priced at $101.83, and its $141.68 average target price indicates room for a 39% gain in the next 12 months. (See NOW stock forecast)

Salesforce

Since emerging from the dot-com era more than two decades ago, Salesforce has remained one of the defining names in enterprise software. The company built its reputation around cloud-based customer relationship management tools, and now finds itself navigating another major shift as AI begins changing how businesses operate.

Rather than treating AI as a standalone add-on, Salesforce is weaving it directly into the workflows companies already use every day. Its Agentforce platform combines human employees, autonomous AI agents, unified data management, and the company’s Customer 360 applications into a single ecosystem designed to streamline sales, service, marketing, and broader business operations.

Even though it’s bringing AI into its line of product offerings, Salesforce has not given up on its 27 years of built-up CRM expertise. The company’s reputation for quality in customer service, data management, e-commerce, marketing, and sales is a powerful asset and provides Salesforce with a strong foundation to stand on during what is shaping up to be a tough period for the software industry.

By bringing agentic AI on board as a supplement to human customer service agents, Salesforce is adding a round-the-clock digital capability that brings out the best in both AI and human agents. The goal is to create an unlimited service force, capable of taking customer resource management to a higher level – and to match the digital economy’s ever-increasing work pace. The company can boast that it is the industry’s #1 AI-integrated CRM provider.

Salesforce has continued to expand its workforce, despite the headwinds facing the software industry. In recent months, the company has announced contracts with the Veterans Health Administration, Merck Animal Health, and, most recently, a $72 million contract award from the US Air Force.

Still, the stock has not escaped the broader selloff hitting the software sector. Salesforce shares have fallen about 32% this year as investors weigh concerns surrounding AI disruption, competition, and the challenge of turning aggressive AI investments into meaningful monetization. The decline has come despite continued operational strength and better-than-expected financial results.

In its fiscal 4Q26 results reported back in February, Salesforce generated $11.2 billion in revenue, representing 12% year-over-year growth and topping Wall Street expectations by $9.4 million. The company also reported non-GAAP earnings of $3.81 per share, beating estimates by $0.76. Free cash flow also saw a substantial jump, climbing from $3.8 billion in the prior-year quarter to $5.3 billion in the latest report. Salesforce will release its fiscal 1Q27 report next week, on May 27.

Meanwhile, 5-star analyst Tal Liani believes investors should remain mindful of several longer-term concerns. Liani says of the stock, “Salesforce remains a deeply entrenched platform, yet we expect a structural reset driven by AI transition that raises three core concerns: muted net new customer additions, limited upsell potential, and an underwhelming AI monetization pathway. We believe the company is transforming from a historically high growth platform to a mature cash generator. Therefore, we model structurally lower growth, at ~10% annually.”

Putting this stance into a recommendation, Liani rates CRM as Underperform (i.e., Sell), and sets a price target of $160, suggesting a one-year share price loss of ~11%.

The broader Wall Street picture looks far more optimistic. CRM currently has 37 recent analyst reviews on file, including 27 Buys, 8 Holds, and just 2 Sells. With shares trading at $179.42 and the average price target sitting at $255.88, analysts overall see room for ~43% upside in the year ahead. (See CRM stock forecast)

After looking at the data and at analyst Liani’s comments, it’s clear that Bank of America is tagging ServiceNow as the software stock to buy in a volatile market.

Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.