Key Highlights

● Salesforce slid on Thursday without reporting Earnings of its own.

● A software selloff led by ServiceNow dragged the sector lower.

● Scrutiny of the planned $5.66 billion Braze Acquisition added pressure.

● Caterpillar led the Dow lower while Merck, Nike and Boeing offered some offset.

Salesforce (NYSE:CRM) slid without an earnings report of its own, caught in a sector-wide selloff triggered by ServiceNow (NYSE:NOW) and weighed down by questions over its proposed purchase of Braze (NASDAQ:BRZE).

Collateral damage

Salesforce did not report earnings on Thursday, October 29, but it still took a beating. The stock slid to rank among the biggest decliners on the Dow Jones Industrial Average, and it was one of the heavier drags on the S&P 500.

Two forces combined against it, according to market commentary: a broad selloff in software stocks led by ServiceNow, and scrutiny of Salesforce's planned $5.66 billion acquisition of Braze, the customer engagement platform.

ServiceNow's shockwave

The software rout began after ServiceNow reported third-quarter results on Wednesday evening. Adjusted Earnings Per Share of $1.00 fell just short of the $1.02 estimate, ending a six-quarter streak of beats. More importantly, its fourth-quarter guidance for current remaining performance obligations, a key measure of future contracted revenue, came in below expectations.

ServiceNow's stock collapsed to $109.67, its worst day on record. Fortinet (NASDAQ:FTNT) also plunged after cutting its service Revenue forecast, closing at $139.10. Together, the two dragged the whole sector down. The software ETF IGV slid sharply, according to market data.

Salesforce and ServiceNow compete in enterprise software, and investors often treat them as a group. When one sends a warning about demand, the others tend to suffer. That sympathy-selling effect can be severe on days like Thursday, when investors sell first and sort out the differences between companies later.

The Braze question

The second pressure point was Salesforce's planned Braze deal. At $5.66 billion, the acquisition is a significant commitment, and it has drawn scrutiny, according to market commentary. On a day when investors were questioning the growth outlook for software, questions around the deal added to the weight on the stock.

AI fears hit software

The broader context was a market wrestling with the costs and consequences of artificial intelligence. Alphabet (NASDAQ:GOOGL) suffered its worst day since its 2004 IPO after its results revived worries about AI spending. Software names faced a different AI fear: that the technology could disrupt their Business models. Market commentary cited AI-disruption worries in explaining the slide in Cybersecurity stocks such as Palo Alto Networks (NASDAQ:PANW) and CrowdStrike (NASDAQ:CRWD).

One market analyst said that "markets are no longer rewarding companies simply for investing heavily in AI." For software firms, the question is no longer just whether they spend on AI, but whether AI erodes Demand for their products.

The Dow's tough day

Salesforce was part of a cluster of decliners that pulled the Dow down 132.54 points to 52,342.56. Caterpillar (NYSE:CAT) led the losses with its worst day since March 2020, while Amazon (NASDAQ:AMZN) slid ahead of its earnings report. Merck (NYSE:MRK), Nike (NYSE:NKE) and Boeing (NYSE:BA) provided some offset.

Beyond the Dow, the picture was more mixed. The Nasdaq Composite fell 365.13 points, but the Russell 2000 gained 28.71 points and more than 400 S&P 500 stocks rose. Investors were rotating into health care, financials and real estate, according to market data.

What to watch

Watch for any update on the Braze deal's progress and whether Salesforce addresses investor questions about the deal. Watch whether software stocks stabilise after Thursday's rout or whether the selling continues on Friday, October 30. Salesforce's own next earnings report will be a key moment for the company to show that demand remains solid despite ServiceNow's warning signs and the broader AI disruption debate.