We recently published a list of 10 Trending AI Stocks in October. Since ServiceNow Inc (NYSE:NOW) ranks 7th on the list, it deserves a deeper look.

Tom Lee, Fundstrat co-founder, while talking to CNBC in a latest program, explained his bullish case for the market and why he believes the S&P 500 is headed to close the year “well beyond” 5,700.

“Bull markets are supported by a strong fundamentals and this is a case where not only has the economy survivie extremely high interest rates but the Fed is beginning to cut rates, and an economy that has been sort of languishing has been China. Now we have stimulus and what looks like some bazooka policies that are supporting that region, and we have a lot of cash on the sidelines. I think this is a formula for stocks to do pretty well the next three to 12 months, and that’s why we think that we would be well beyond 5700 before year-end.”

Lee said that he’s inclined to buy “risks outright” as he believes more upward momentum would come for stocks after the election.

“Small caps still have good fundamentals, earnings growth is accelerating, the media P/E is eleven times which is almost seven turns lower than the S&P so I think there is still case to be made that small-cap are starting a multi-year gain.”

For this article we picked 10 AI stocks that are making big moves on the back of latest news. With each company we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

ServiceNow Inc (NYSE:NOW)

Number of Hedge Fund Investors: 97

William Blair’s top picks list also includes NOW. The firm recently said it views ServiceNow Inc (NYSE:NOW) as a strong player in generative AI, benefiting from its established relationships with enterprises. “ServiceNow is seen as a key partner for many businesses, with direct access to CIOs and the broader C-suite due to its product positioning,” said analysts Jake Roberge and Arjun Bhatia. They noted that ServiceNow Inc (NYSE:NOW) can seamlessly integrate its GenAI solutions into the products its customers are already using.

ServiceNow Inc (NYSE:NOW) impressed the market with strong second-quarter results which have proved the company’s AI potential. Morgan Stanley’s Keith Weiss maintained his Overweight rating on the stock and a $900 price target, saying the AI momentum is real and continues to build. ServiceNow Inc (NYSE:NOW) said additional annual revenue from new Pro Plus edition contracts, which include generative AI features, doubled from the previous quarter. The company secured 11 new contracts worth over $1 million each. Analysts believe ServiceNow Inc (NYSE:NOW) strength is its NOW platform as it makes it easier for companies to integrate all tools and software at one place, including Salesforce, Microsoft, and SAP. The company’s portfolio has 168 digital workflow solutions with a 98% renewal rate.

In a tough environment for SaaS companies, ServiceNow Inc (NYSE:NOW) managed to raise its full-year guidance. It also raised its operating income by 50 basis points.

NOW is trading at about 40 times its estimated earnings for 2025, which is not a high multiple when compared with over 20% revenue growth estimates for ServiceNow Inc (NYSE:NOW) and an increasing number of growth catalysts.

Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:

“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”

Overall, ServiceNow Inc (NYSE:NOW) ranks 7th on Insider Monkey’s list titled 10 Trending AI Stocks in October. While we acknowledge the potential of ServiceNow Inc (NYSE:NOW), our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.