One of the software industry’s biggest hype men just made a stunning claim that’s almost hard to comprehend.
That is, unless you’re a true believer in the company.
“I explained very clearly to our company that when this thing breaks loose, it will break loose and we will be a trillion-dollar company. It’s just a question of which day it breaks loose. It’s not a question of whether it will,” ServiceNow (NOW) CEO Bill McDermott said in a new Fortune interview this month.
ServiceNow currently has a market cap of $94 billion. The stock crashed 54% to $91 in the past year, making it one of the worst-performing big-name software stocks, as investors fret that the SaaS model is getting eaten alive by the likes of Anthropic (ANTH.PVT) and OpenAI (OPAI.PVT).
The stock hit an intraday record high of $231 in early December 2024.
Who is Bill McDermott? McDermott joined German software giant SAP (SAP) in 2002, eventually becoming the first American to serve as the sole CEO. During his tenure as SAP’s CEO, from 2010 to 2019, he led a transformation into a cloud-based business and helped nearly quadruple the company’s market value through a host of large acquisitions.
Since late 2019, McDermott has served as the chair and CEO of ServiceNow and has kept his trademark swagger front and center in interviews and on his Instagram account, where he often shares inspirational messages to his followers.
Software stock vibe: Software stocks have been obliterated this year as AI disruption calls into question once-foolproof business models.
The sell-off has touched everyone from enterprise software behemoth Salesforce (CRM) to midcap enterprise play DocuSign (DOCU).
This “SaaS-pocalypse” has been driven by three primary concerns:
The democratization of development, where AI enables businesses to build custom in-house tools.
Seat compression, as AI agents replace human workers and reduce the need for per-user licenses.
Growth lag, where software companies struggle to monetize AI while infrastructure providers like AI chipmaker Nvidia (NVDA) reap the rewards.
“One thing we are not investing in today is software. There’s a lot of software debt, which has started to get distressed,” Strategic Value Partners founder and CEO Victor Khosla told Yahoo Finance at the Milken Institute Global Conference last week (video above).
Strategic Value Partners manages about $22 billion in assets under management.
Khosla added, “When software gets troubled, it doesn’t have a gentle, oh, revenues are down 10%. The troubled software businesses can even just fall off a cliff. There is no business, and they have no hard assets … We’ve looked at it hard for the last couple of years.“