Dan Ives: Optimistic about SaaS providers like Salesforce and ServiceNow, the market underestimates their AI application potential

In a market that is highly focused on AI-related components and infrastructure investments such as GPUs and data centers, recent weak performance in enterprise software stocks has raised concerns among investors about whether “traditional SaaS” will be replaced by AI. In response, Wedbush analyst Dan Ives discussed Jensen Huang, CEO of NVIDIA,’s views on AI development and offered insights into the roles of enterprise software giants like Salesforce (CRM), ServiceNow (NOW), and Microsoft, pointing out a clear gap between the market’s current perception of software’s role in the AI revolution and the reality.

The AI Revolution Is Not Just Hardware; The Core Will Be Software Applications

At the start of the program, the host referenced Jensen Huang’s comments, emphasizing that the long-term focus of the AI revolution is not solely on infrastructure such as GPUs and data centers. Instead, the real value will be driven by how enterprises and industries integrate AI into actual workflows and scenarios.

In response, Ives said that currently, the market is indeed heavily concentrated on data center and GPU infrastructure, with this construction phase expected to last up to 10 years. However, he believes that the “core” supporting the AI revolution in the long term will be the application deployment and commercialization of enterprise software.

Market Skepticism About Enterprise Software Being Replaced by AI, Ives Calls It a Serious Misjudgment

Recently, there has been a noticeable pessimistic sentiment toward enterprise software stocks, with investors worried that companies like Salesforce and ServiceNow might be replaced by AI tools, potentially leading to structural damage.

Ives stated that he does not believe Salesforce and ServiceNow are fundamentally flawed or in decline, and he described this as the “biggest gap between market perception and fundamentals” he has seen in his career. He pointed out that the market is generally underestimating the critical role enterprise software will play in the AI revolution.

For example, companies like Palantir, Snowflake, and MongoDB are already being discussed regarding their positioning in AI applications, but there is excessive pessimism about Salesforce and ServiceNow, which are deeply embedded in enterprise workflows.

SaaS Valuations Are Being Cut But Do Not Reflect the Potential Incremental Revenue from AI

The program mentioned that Salesforce’s forward P/E ratio is currently around 15, and ServiceNow’s is about 25, with their stock prices having already experienced significant declines. The market questions whether these valuations are still justified.

Ives pointed out that, in terms of revenue growth potential, Salesforce and ServiceNow could generate an additional 20% to 30% in revenue, representing hundreds of billions of dollars in scale, but the current market valuation does not reflect this potential growth space.

He also admitted that, in the short term, enterprise software companies are indeed facing headwinds, and Salesforce CEO Marc Benioff has publicly acknowledged this. However, from the perspective of enterprise customer numbers and the degree of product integration into internal IT architectures, the benefits have not yet been reflected in financial data. It will likely take 6 to 18 months for these benefits to gradually show up in revenue and growth figures as applications are deployed.

Not All Software Will Be Replaced by AI; Enterprise Platforms Are a Different Case

Regarding the market view that “software will be replaced by AI,” Ives said that not all software companies should be judged the same way.

He noted that some software companies focused on small and medium-sized businesses (SMBs) might indeed be impacted by AI tools, but companies like Salesforce, Adobe, Workday, and ServiceNow, which deeply embed into core enterprise processes, are different and should not be evaluated using the same standards.

Market Questions About Microsoft’s Downgrade; Ives: Its Critical Role in the Enterprise Remains Unchanged

The program also mentioned that Microsoft was recently downgraded by analysis firm Melius, which commented that CEO Satya Nadella has lost the narrative dominance in AI. Investors are concerned whether Microsoft’s AI capital expenditure aligns with the pace of Google and Amazon, and whether short-term free cash flow might be affected.

Ives responded that, from the perspective of enterprise AI adoption, Microsoft’s role in enterprise cloud and IT infrastructure remains crucial. He believes that for the AI revolution to be widely adopted at the enterprise level, Microsoft’s role cannot be ignored.

He also pointed out that the current market sentiment toward Microsoft is cautious, “waiting for proof,” but the actual commercialization of AI in enterprises is still in its early stages. Microsoft’s current performance only reflects part of this demand.

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This article, Dan Ives: Optimistic About Salesforce, ServiceNow and Other SaaS Providers, Underestimated Their AI Application Potential, originally appeared on Chain News ABMedia.